Good day, and welcome to The Carlyle Group Inc. Fourth Quarter 2025 Earnings Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. To remove yourself from the queue, press star 11 again. As a reminder, this call may be recorded. I would now like to turn the call over to Daniel Harris, Head of Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, and welcome to The Carlyle Group Inc.'s fourth quarter and full-year 2025 earnings call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz, and our Chief Financial Officer, Justin Plouffe. 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 on Form 10-Ks, including those identified in the Risk Factors section of our annual report that could cause actual results to differ materially from those indicated. The Carlyle Group Inc. assumes no obligation to update any forward-looking statements at any time. In order to ensure participation by everyone on the call today, 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. 2025 was a record year for The Carlyle Group Inc. We significantly outperformed the targets we identified at the beginning of the year. We delivered record fee-related earnings, up 12% year over year, materially exceeding our original forecast. We also had record FRE margins, 47%. We generated $54 billion of inflows, again significantly outperforming our original $40 billion target. Engagement across the global franchise and all client segments from institutional to wealth continued to build throughout the year. Transaction fees were a record $225 million, up almost 40% year over year. We closed out the year with record assets under management of $477 billion, driven by strong investment performance and robust fundraising across the platform. Importantly, our 2025 results demonstrate the breadth, depth, and durability of our global business. Before I walk through our results in more detail, let me just briefly comment on the macro environment. Looking back at 2025, despite concerns around shifting geopolitical dynamics, the market proved to be resilient. M&A and IPO activity accelerated as market sentiment improved. 2025 ended with credit spreads near all-time tights, and equity markets at all-time highs. Over the last several years, a lot has been written about low levels of monetizations in the private equity industry. The Carlyle Group Inc. has proven to be an exception to that narrative. Since 2024, we have been the number one private equity sponsor globally by IPO proceeds, generating roughly $10 billion of IPO issuance over the past two years. This number is more than any other firm in our industry. The most recent example of this is Medline. Medline raised more than $7 billion and an equity valuation of $49 billion, a milestone transaction for The Carlyle Group Inc. and the broader…

Thanks, Harvey. Good morning, everyone. I'd just like to start by saying how excited I am to assume the CFO role and have the opportunity to work more with each of you. And, of course, a big thank you to John Redett for his time and leadership as CFO, for his help and guidance, which has made this transition so seamless. Turning to our results, in 2025, we had our third best year ever in terms of distributable earnings. We generated $1.7 billion in DE for the year, or $4.20 per share. This was up 11% from the prior year and is our highest level since 2022. For the fourth quarter, we generated $436 million of DE, or $1.01 per share. Fee-related earnings were a record $1.24 billion in 2025, a 12% organic growth rate, driven by sustained operating momentum across the firm. The full-year results significantly exceeded our initial guidance. And for the fourth quarter, FRE was $290 million. Total fee revenues were a record $2.6 billion for the full year, a 10% organic growth rate. Fee revenues were primarily driven by Carlyle AlpInvest, which was up 46%, and Global Credit, which was up 13%. For the quarter, fee revenues were $670 million, an increase of 2% year over year. Our full-year FRE margin was also a record 47%, up from 46% last year. This margin expansion reflects continued operating discipline and the scalability of our model. Three years ago, we outlined an organic growth strategy which has clearly been successful as we have delivered consistent earnings growth. We continue to invest in priority growth initiatives, such as Global Wealth, insurance solutions, and asset-backed finance, among others, and see significant opportunity in each for continued growth. We remain focused on investing for growth and expect that margins will further…

Thank you. As a reminder, to ask a question, please press 11. And our first question comes from Alexander Blostein with Goldman Sachs. Your line is open.

Hey, good morning, Harvey. Welcome, Justin, officially to the CFO role. So, Harvey, to your point, The Carlyle Group Inc. showed a lot of momentum in beginning to drive pretty meaningful realizations in the private equity portfolio in 2025. You sound constructive, but, obviously, the environment's changed a bit just in the last couple of days here. Would love to get your thoughts on how you're thinking about sort of sustainability in the monetization momentum into 2026? How dependent are you guys on the equity market exits versus more M&A transactions that you might see in your backlog? Thanks.

You know, I'd be reluctant to extrapolate the last week's volatility into something that becomes longer stretched. You know, we're all gonna have to see how the market responds to this kind of reallocation of capital and some concerns about capital spending. I'll tell you, we get our best information, Alex. We've talked about this before. From our proprietary data in our portfolio. When we look across all the companies that we own and interact with, the January data looks very good. So if you were just to look at that data, you would feel very good about GDP growth, margins, EBITDA generation. And so I can extrapolate that, obviously, from our portfolio, given the size of it, to the broader economy in the US and globally. But it looks pretty good. Obviously, the markets have demonstrated some jitters. And we'll all navigate through that. But I would say, in aggregate, again, we're all going to deal with the market environment we get. But credit spreads have moved a bit. There's a bit of hesitation. It's a bit of a, how would I say it? A bit of self-first ask questions later as people readjust their portfolios. But the economic engine feels quite good. Having said that, the markets have demonstrated some fragility, and we've talked about that. But I don't think that should be too surprising given we're at record highs. But, again, going back to the engine and the performance, it feels very good.

Thank you.

Our next question comes from Glenn Schorr with Evercore. Your line is open.

Hello there. How are you?

Great.

So look, you're in an interesting spot to comment on what's going on in perception in the direct lending and credit world because, you know, you have a piece in CPAC, you have a piece in your secured lending fund. But for the most part, you've built a big credit business outside of what's in the line of fire right now, at least publicly. Right? So in your CLO and your ABS business. So my gut is, forgive me for putting words in your mouth, you've been probably thinking about having a bigger presence in the direct lending world over the last couple of years as you've seen the growth. And software exposure excluded. I'm curious how you think about the state of play, how you think about credit quality and exposures out there, and more importantly, how does any of this inform how you're thinking about growing your credit platform and including a bigger presence in the wealth channel? Thanks. Appreciate the thoughts.

Hey. Thanks, Glenn. Well, maybe, if need, I'll let Justin fill in some details on the credit business because he was a key driver of building that over the last twenty years. But what I would say with regards to how we're being informed by all this, there was a lot of discussion last year about direct lending. The marginal market participants coming in and driving spreads tighter and maybe terms a bit too aggressively. Ironically, when I showed up three years ago, some of the conversations I had about had with you were things like, hey. Guys should be bigger in direct money. Now we've been very systematic and thoughtful about how we've been doing that. But we've really been, I'd say, kind of positioning for the opportunity set to open up like this. And so we feel quite good about it, given our footprint and ability to scale from here. As I mentioned, we've added a new head of direct lending and Justin drove a lot of that along with Mark Jenkins, obviously. New originations. So we feel quite front-footed. On the wealth front, we continue to have the platforms. Actually, we were positive on all our flows in the fourth quarter. One of our best quarters ever across the entire platform, including credit. And we're launching on more platforms. And so again, momentum feels good. There's just nervousness that has gripped the market for the last couple of days. But again, we're being thoughtful, very thoughtful about deployment. But we feel good about the positioning, the breadth of the franchise. I don't know, Justin, if you'd add anything.

No. That's exactly right. I mean, we've built our credit business specifically to cover really the full universe of what private credit has to offer, to be diversified and build durable portfolios that, you know, should do well through cycles. And, of course, we've been managing credit for more than twenty-five years through multiple cycles. So I think our credit business is really an all-weather business. I get to incredibly well positioned to weather any of this volatility. And we're seeing that result in terms of investors' appetite. As Harvey said, we had significant inflows into our credit wealth funds this quarter. So we're in a good position. We feel really good about our portfolio and our business.

Okay. Art, I don't know what we'd do with the detail that we got yesterday, but a lot of the companies were able to provide the software and related exposure as a percentage of AUM, a percentage of each of the businesses. Are you able to give us a little apples to apples to put things in perspective?

Yeah. You know, software investing has never been a big driver for The Carlyle Group Inc. You know, as you know, our power allies have been in things like aerospace and defense and healthcare and industrial. So it's never been a huge driver of our business. I think others were giving a percentage of AUM. Ours is 6% of total AUM, which I believe is below others. But, again, not a huge driver of our business and not something we think is problematic.

We try to use the broadest possible definition of that 6%.

That's right. Exactly. All-inclusive as however you could think about it. Not part of caps, tax, everywhere it could be. But as Justin said, this is not a piston in the engine that has been a key driver of The Carlyle Group Inc.'s strategy.

Thank you, guys.

Thanks, Glenn.

Our next question comes from Mike Brown with UBS. Your line is open.

Great. Good morning, guys.

Good morning, Mike.

Hey. So maybe I'll ask on the margin here. So it reached 47% here in 2025. And, you know, looking at the segments, it looks like AlpInvest was the best driver followed by credit. GPE's margin climbed a bit here. AlpInvest had some tailwinds from catch-up fees. And, just looking forward here. So, Justin, you mentioned that margins expect margins can continue to expand. Can you just touch on each segment? Which segment could see the most expansion in 2026? And then, longer term, which segment drives the margin higher longer term? Which one could kinda be the biggest growth engine there?

So we'll go into more detail of that on the twenty-sixth. I really hope you can join us for that. And we go through the multi-year plan. What I will say about the margin just reflecting on the past three years is I think what the team has done is pretty remarkable because they've managed to invest in the business, add resources, grow headcount, thousand basis points, basically, since really reposition the platform, and drive the margins the day I showed up. So it's been a really remarkable effort. But we'll go into more detail on all those things on the twenty-sixth in terms of the forward outlook.

Okay. Looking forward to the update. Thanks.

Thanks so much.

Thank you. Our next question comes from William Katz with TD Cowen. Your line is open.

Okay. Thank you very much. I presume the answer will be see you on the twenty-sixth, but I'll ask it anyway. I was wondering if you could maybe talk a little bit about where you might stand in terms of capital raising, particularly for the Fund IX. Looks like Fund VIII had really good appreciation. Hear your comments on the realization pace and the DPI metrics as well. And then I'm curious, you are running up against the conclusion of your repurchase program. I'm wondering how you're thinking about capital priorities into the new year. Thank you.

Thanks, Bill. So I'm trying to figure out what I say before I say see you on the twenty-sixth. So a lot of the forward-looking stuff, we are gonna go into, obviously, much more detail on the twenty-sixth. I would say that the client engagement and the fundraising is impressive for a whole host of reasons. But when I think about it and what the team has accomplished over the last couple of years, it really is about the diversification in the business mix both across institutional clients. So it's pension funds. It's insurance. It's sovereigns. And obviously, the strategic pivot in the wealth channel now having basically all three flagship funds up and running, but it's also geographic. And so you have this nice diversified set across clients and geographies. And opportunities that's really driving all of it and the success of the $54 billion that we bought. I'm not sure on the success of the last couple of years. And so we'll give you more insights. But I would say, again, we feel quite well positioned for forward trajectory. Given the when we look at the fundraising over the next couple of years, flagship vehicles that'll be in the market, but everything that's gone into building and supporting those flagship vehicles and resources we've added. So but but will see on the twenty-sixth.

Thank you.

Our next question comes from Patrick Davitt with Autonomous Research. Your line is open.

Hi. Good morning, everyone. Appreciate the software exposure at percent, but I would imagine your CLOs have a fair amount of exposure. And those loans are obviously down a lot. So could you frame the exposure just in the CLO bucket? And to what extent the performance as a result of this recent volatility could impact overcollateralization tests. Thank you.

Our CLO performance has been among the best in the industry. Our team has done a phenomenal job. Our software exposure is right on top of the index. We're not overweight. We're not underweight. And, look, when we invest in software, we've been doing this for many, many years. Right? So we've had disruptive technologies before, and our teams are very, very well positioned to address these. So, look, our CLO business is the best in the world in my view. Their performance has been fantastic. I don't expect this recent volatility to affect them at all.

If anything, again, I don't wanna make near-term market predictions because things are so sort of, I don't know, one day, we could be tighter. One day, we could be looser. But there may be some technical opportunities here in the marketplace across that business, which give us the opportunity actually to launch a few deals. But again, I think, look, Justin grew up in that business. The team's world-class. But that's a, we're kinda, as he said, right there with the index.

Thank you.

Our next question comes from Brennan Hawken with BMO Capital Markets. Your line is open.

Thanks for taking my question. This is Mark Pelletri on for Brennan Hawken. Within AlpInvest, the fees proceeding this quarter, I believe that it exceeded the $56 million reported for the full year. Could we read that to imply there was negative catch-up fees this quarter?

Not negative. No. They're not negative catch-up fees this quarter. We did have catch-up fees earlier in the year. But if you actually strip those out, AlpInvest management fees were up 4% quarter over quarter. So the momentum there is still good.

Yeah. Thank you.

Our next question comes from Steven Chubak with Wolfe Research. Your line is open.

Hi. Good morning, Harvey, and welcome, Justin. Appreciate you guys taking my question. So wanted to ask on transaction fees. Had another really strong year. You indicated you anticipate a more active monetization backdrop for next year. With transaction fees just nearly tripling over a two-year time frame, now is there any way for you to help frame the revenue upside or potential? Are there any areas where you feel like you're under-earning? And are there any remaining gaps on the platform in terms of your overall offering?

We'll give you more insights into that on the twenty-sixth in terms of the forward. I think I like that. You know, you really, yeah. Sorry. But we really kinda nailed it. In terms of what I think is most impressive. Is this basically was almost at zero when I showed up three years ago. What I think it really demonstrates is the ability of the platform, the way the team has led and built this business, and really flexibly focused on a strategic priority. You may remember a couple years ago, one of the work streams I talked about was capital markets and transaction fees. And I think there were some skeptical people that thought we wouldn't be able to build this out. Short answer is, and we thought it before, there are some gaps. There's still some businesses that because of historical fund documents, will come online. An opportunity set. But we still see upside, but we'll give you more color on that on the twenty-sixth.

Fair enough. Thanks for taking my question.

Thank you.

Our next question comes from Brian McKenna with Citizens. Your line is open.

Thanks. Good morning, everyone. So there's clearly a ton of momentum in the wealth channel, and it feels like flows are really beginning to inflect here. I suspect a lot of this has to do with your efforts on the branding front and what The Carlyle Group Inc. has to offer these clients globally. But can you spend a minute talking about the Carlyle story you're telling in the wealth channel today? What's resonating with these distribution partners and their clients? And then are there still opportunities to further enhance your brand in the channel?

So this is obviously a strategic pivot three years ago. And this is what we've done. First of all, the brand is global. Iconic, long, long history. And that is fundamental to being on platforms being recognized globally. You know, we, David Rubenstein and the team, have been going to The Middle East since the nineties. We were the first to have a franchise in Japan. We stayed in Japan for twenty-five years. They're the only firm that didn't leave. So it's this commitment geographically and the brand recognition which is a cornerstone of an ability to deliver solutions. Obviously, performance is a key driver here. And the way the teams have thought about driving these solutions is about creating diversification. And so the breadth of diversification is quite important to our clients. And then, of course, there's the client engagement. Working with our partners all over the world, getting very close to the advisors. I personally spend time with advisors. It's quite critical for us to understand their needs. We're not in the business of telling everybody that in every single person's portfolio, they should have private markets, but where it makes sense, we want to make sure that we're providing the most value add in terms of a series of options with diversification that can be durable and deliver over the long term. So we're very, very focused on that. I will say the team's done a remarkable job of adding resources. We've done things that have been seen very well by the market, like the Oracle Red Bull partnership. So it's been a multi-pronged investment here, which has really driven this. And we think there's very, very long-term upside. And we're enthusiastic to see what happens ultimately in a retirement channel. So again, long-term driver, but we're being very disciplined about it.

Great. Thanks, Harvey.

Thank you.

Our next question comes from Ben Budish with Barclays. Your line is open.

Hey, good morning and thank you for taking the question. Harvey, most of the forward-looking questions, I appreciate your saving for the investor update, but I'll ask maybe a two-parter anyway. For specifically for 2026, just curious if you could talk about what you're expecting in terms of management fee growth. I think this year should be a bit of a funky year with some large flagships coming to market later in the year, realization picking up, which could be a headwind to fee-earning AUM in the private equity segment. And so probably, you know, this year, not quite as indicative, at least from a management fee growth perspective, of what I suspect you're gonna talk about. So curious if you can give any color there. And if you can't, maybe just one other question on the year on the realization side. Given where CP7 and CP8 are, I think there's an expectation we should see realizations before realized performance revenues come in. Just curious how we might think about that trajectory as well over the course of this year. Thank you.

Yeah. Again, so I don't want to disappoint you, but we're going to go on such a level of detail on this on the twenty-sixth. That I think giving you a fuller picture makes a lot more sense in terms of the strategy and how everything is coming together. Again, the only thing I'll go back to on realizations is how proud we are of our team. You know, a couple years ago, the global private equity leadership really decided that our clients wanted monetizations. They took advantage of a very attractive market environment. It was a very deliberate strategic decision across the platform. As I said before, it was global. We were a market leader. We monetized more IPO assets than anybody in the world. And so we're quite proud of what they've done. But this is strategically how they position the platform. But we'll go into a whole host of detail on the 26. So I apologize for leaving you a little bit short on the kinda near-term questions.

Alright. No worries. Thank you.

Thank you. Our next question comes from Kenneth Worthington with JPMorgan. Your line is open.

Hi, good morning. Thanks for taking the question. So 2025 was a good environment for the CLO market. How is 2026 looking for The Carlyle Group Inc. here? For CLOs sort of inside and outside the U.S.? And does the software and AI angst sort of impact the outlook here? And then along the same lines, you set up a fund to help with the equity pieces. To what extent are you utilizing that equity, and how much dry powder does that fund still have?

I'll let Justin get into the details of the CLO business. What I would say on the AI of things, again, this is more of a broad market. Environmental atmospheric, I think. I mean, again, we've seen the fragility in the markets. I think they're really just trying to process what the implication is across markets and industries. But specifically on the CLO business, I'll turn it over to Justin in terms of how we feel about the marketplace and environment.

Yeah. We've had an incredible two years in our CLO business in terms of issuing new deals, but also resetting deals and extending the life of those deals. The team has been incredibly active in that regard. And that makes our business just more durable over time. Now the year started off in CLOs. Constructive, I'd say. Spreads are tight on both sides of the arbitrage. I think we're gonna have another active year. I don't know if it'll be the record year of the last two years, but our team is, in my view, the best in the business. If there is activity in the CLO market, we will be participating. And the business is really well positioned now that we've extended the life of so many deals over the last two years.

Great. Thank you.

Thank you. Our next question comes from Michael Cyprys with Morgan Stanley. Your line is open.

Great. Thank you. Just a question on the credit business. It continues to put up meaningful growth across the overall credit platform. Just curious if you could elaborate a bit on some of the steps you're taking to enhance originations, expand your sourcing funnel, and what actions might you look to take here in '26?

Yeah. We've done a number of things to enhance originations, really not just last year but over the past five years under Mark Jenkins' leadership. I mean, recently, just in the past year, we did hire Alex Chi from Goldman Sachs to come in. Fantastic track record. Thirty years at Goldman in that business. We hired Mike Mayer, who's got decades of experience in origination. We've actually built out our origination team even beyond that just in the last few months. And that's just in direct lending alone. So we've got a fantastic origination engine. We did the most originations we've ever done in credit in the past year in 2025 with almost $30 billion of originations. So that engine is hitting on all cylinders. And as I said, it's a broad-based durable business. It crosses many, many different parts of the private credit universe. And so no matter where the market goes, we have a strategy. We have a team that we think is ready to take advantage of. So we feel great going into 2026.

Any steps you might take here in '26? Around expanding sourcing from here, or is it all done enhancing the origination machine?

It's mostly done, but we'll get more into the strategy on the '20 in terms of how we're positioning. Because we do think we have some unique levers we can pull. But in terms of the resource build-out, Justin and the team have done a great job in the past year.

Great. Thanks. Looking forward.

Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Daniel Harris for closing remarks.

Thanks, everyone, for your time today. I know it's been a very busy week. Look forward to seeing all of you on February 26 for the shareholder update. If you have any questions following today's call, feel free to follow up with investor relations. Have a great weekend.

Thank you for your participation. You may now disconnect. Good day.