Good day, ladies and gentlemen, and welcome to the Carlyle Group First Quarter 2013 Results Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I'd now like to turn the conference over to your host, Mr. Daniel Harris, Head of Investor Relations. Please go ahead, sir.

Thanks, Allie. Good morning and welcome to Carlyle's First Quarter 2013 Earnings Call. With me on the call today are our Co-Chief Executive Officers, Bill Conway and David Rubenstein; and our Chief Financial Officer, Adena Friedman. Earlier this morning, we issued a press release with our first quarter 2013 results, a copy of which is available on the Investor Relations portion of our website. Following our remarks, we will hold a question-and-answer session for analysts and institutional unitholders. 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. Please note that 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 this time. With that, let me turn it over to our Co-Chief Executive Officer, David Rubenstein.

Thank you for joining this quarter's earnings call. As you know, we have just completed the one-year anniversary since our IPO, and we believe the first year of being a public company has gone well. Over our 26-year history, we have provided consistent, steady and attractive returns for our investors. And we have done that as well during our first year as a public company. Since we went public last May, performance has been strong, steady and appealing to our investors. And very importantly, from our perspective, we have done what we said we would work to do when we went public. Specifically, we have focused intensely on performing in all the core elements of the Carlyle engine, investing across our platform, creating value in our portfolio, realizing proceeds for our fund investors and raising significant amounts of new commitments. We continue to expand our platform, adding a new domestic energy partnership, a commodities hedge fund strategy, a new international energy strategy, new emerging market capabilities, and we launched several new organic investment strategies. Global Market Strategies continues to grow quite well, and we were the top firm last year in terms of new-issue CLOs. We have maintained our focus on producing a cash-rich earnings stream, resulting in an attractive quarterly and year-end true-up distribution for our unitholders. And we continue to strengthen the firm for the long term by investing in our infrastructure, our people and, importantly, in our funds. Our personal commitments to Carlyle funds increased by $1.4 billion in 2012, and we have cumulatively invested or committed more than $6 billion in our funds. Let me now turn to highlights for the first quarter. Our fundraising was especially strong. We raised $4.9 billion in the quarter. Over the past 12 months, we have raised $16.9 billion. We…

Thank you, David. Let me start with some observations on economic conditions based on our portfolio of data, and what the implications are on our investment outlook. In general, our proprietary economic indicators are slightly weaker than they were at the time of our last earnings call. In Europe, we anticipated that the economy would have bottomed by now. Instead, it continues to contract. In the United States, growth continues at roughly the same rate observed since 2010. In fact, there has been much greater volatility in others' forecasts for growth than in the actual data. Our own outlook for slow and steady growth may appear to be optimistic or pessimistic, depending upon the reactions of others to new government data. In China, we witnessed a boom in business volumes at the end of 2012, but we now know that it was a temporary restocking event. In Japan, while idonomics is still at a very early stage, the initial reactions of the real economy are positive, and virtually all gauges of business confidence are up. In general, there have been no major shifts in our investment strategy, and we continue to do what we have been doing, namely: in Europe, we are focused on price, as well as investing behind market-leading companies with global exposure; in the United States, we continue to capitalize on the liquid credit markets, are focused on deploying capital in the middle markets and energy mezzanine lending space, and in buyouts, we're not afraid of buying cyclical businesses; in Asia and emerging markets, we continue to acquire companies that play well to strong GDP growth and even stronger growth in consumer-driven segments. For example, our data suggest growth this year in China of 7% and even faster growth in the consumer sector. Although some may find…

Thank you, Bill. My remarks today will focus on 2 elements of our financial results: first, the growth in accrued carry; and second, our fee-related earnings. Carlyle further positioned itself for significant future realized performance fees through a 21% increase in the accrued performance fee balance in the quarter. As a result, in the quarter, we produced a $441 million increase in total accrued performance fees, which improved our ENI performance and resulted in $2.5 billion in total accrued performance fees net of givebacks. We had 1 fund recover sufficient value to come out of clawback and go back into carry, 2 new funds come into carry, and most of our other 20 funds already in carry increased their carry fund balances. On a net basis, after subtracting performance fee-based compensation, our net accrued performance fees increased to $1.4 billion, up from $1.2 billion at the end of 2012. On an unadjusted per unit basis, our net accrued performance fees equaled $4.58 per adjusted unit. As our mature funds continue to find exit opportunities, we are well positioned to turn our accrued performance fees into realized performance fees to drive future Distributable Earnings performance. Shifting to the subject of fee-related earnings. We have several offsetting activities that will impact fee-related earnings throughout the year. First, our investment in NGP Energy Capital Management will provide a healthy increase in annualized fee-related earnings within the Real Assets segment. As such, the first quarter benefited from approximately $16 million in pretax fee-related earnings from our investments. Offsetting that increase are events and activities that relate to fundraising and timing of the launch of successor funds. Specifically, first, we have 3 carry funds with $9.5 billion in committed capital that came out of their investment periods near the end of 2012, and for which…

During this call, Bill, Adena and I covered different parts of our first quarter record, but each of us was really conveying the same message: The various elements of Carlyle's engine all performed well, which is the result of our continuing to do what we have been doing for so many years, building a truly global, multi-disciplined, alternative investment firm, which provides attractive returns for our fund investors, and now as well for our unitholders, while also making investments likely to yield increasingly attractive returns for many years into the future. Further evidence of the strength of our platform will become even more apparent as we continue to deploy capital. We now have approximately $75 billion of capital in the ground, and as we work to achieve a realization and distribution record consistent with what we've achieved over the 26 years we've been in business. Thank you.

Operator, we're now ready for questions, if there are any.

[Operator Instructions] Our first question comes from Michael Carrier of Bank of America Merrill Lynch.

Just on the guidance that you're providing, or if you want to call it guidance. But just when I think about the investments and some of the near term weakness that we saw this quarter and what you're seeing on fee-related earnings, I guess, maybe -- and particularly just giving your guys thoughts on not focusing on the quarter, and trying to focus more on a year or 2. When you think about 2014 -- and obviously, the further out you get, there's a lot of factors that can change it. But when you think about that, how should we be thinking about the '14 lift when you start to pull back on some of these investments or the fundraising costs start to decline?

Okay, thanks for your question. This is Bill. I would say that we expect reasonable growth in 2014. We obviously gave a lot of thought to our comment that we thought the Distributable Earnings would be relatively flat this year, because we don't give guidance, as you know. And I would say that our portfolio is in excellent shape. Some of it is relatively recently invested and will take a while for it to mature. I'd say I wouldn't trade our portfolio for anyone else's. We've been, in the last 2 years, on a real realization mode, having realized $33 billion. And although I think that the realizations are going to continue pretty strong, not all realizations generate carry and distributable earnings. And so as I look at the relatively near term, we do think that our Distributable Earnings will be relatively flat, and kind of we wanted to convey that to everybody at this time, based upon our view of the near-term outlook.

Okay, got it. And then, Adena, maybe just 2 small items for you. First, on the GMS business, it seemed like the performance comp was a little on the lighter side. I know there's a lot of moving pieces there, and it's only one quarter, but just any nuances there? And then just on the distribution policy, you've just given where the industry is headed. Any thoughts, in terms of the outlook, on the steady -- each quarter and the 4Q kind of true up versus kind of the change in terms of each quarter you just pay it out as it comes?

Sure. Well, with regard to GMS first. On realized performance fees, it's important to note that the hedge funds always realize the performance fees in the fourth quarter of the year, so there's just a seasonality to the Global Market Strategies business related to realized performance fees. Overall, performance fees -- or unrealized performance fees in the quarter were quite strong. So I think that it's a matter of, as they're starting to accrue their performance fees based on the performance of the hedge funds, we'll start to see that grow. And then at the end of the year, it will be realized. But we feel comfortable with the performance of the segment in the quarter for sure. With regard to the distribution policy, we thought long and hard about that distribution policy before we went public. We really wanted to create some consistency for our unitholders, in terms of them understanding that we will provide them a very healthy and consistent yield on the units each quarter, so that they could essentially count on that. As -- and then at the end of the year, based on our cash flow needs and based on the overall performance of the business, we're able to provide them a year-end true-up. We've always said that we don't focus on the quarter. We are an annual business, we believe that, and our distribution policy really reflects that. And so we do not currently have any plans to change that.

Our next question comes from Howard Chen of Crédit Suisse.

I wanted to come back to that Distributable Earnings outlook. Adena, you laid out some of the investment spending initiatives, and that makes a lot of sense to me. But I would have thought, with just the improved operating backdrop, the diversity and sheer number of the investments you have, and where some of those were in the J curve, all that could still drive accelerating DE. So has anything changed in the realization outlook? And how much of this is maybe some conservatism, given where the markets are, Bill?

Howard, the markets' clearly have been very strong. As I've pointed out, our public portfolio was up about 13% in the first quarter. And as I've pointed out also, we sold our position -- final position in Hertz earlier this week. And then SS&C, we sold about half of our position last night. I think in this kind of environment, I don't necessarily know that it'd be conservatism, but as we look at extremely low interest rates, stock market records being set every day, and I just had a look at our portfolio of realizations -- also, of course, as you pointed out, with the investments being made. The investments are being made kind of in 2 big areas: one is new businesses that we're trying to build; and the other is in the fundraising, where we expense the cost of fundraising right away. So we're just trying to tell you the way we see it now.

Okay. And then could you -- while we're on performance, could you expand a bit on the performance of the various segments within Real Assets and, perhaps, expand on your outlook there?

Well in -- we have the 4 segments: Corporate Private Equity, Global Market Strategies, Real Assets and Solutions. Solutions, really being primarily AlpInvest, but relatively straightforward there. You can see that it's been relatively flat at an economic net income of $8 million to $10 million a quarter for the last several quarters. I know of nothing that would indicate that might change, although their Assets Under Management have been growing as they've added some outside money. I think they've been growing anyway, but they've added a little bit of outside money from beyond the initial big 2 investors that they had. Global Market Strategies has clearly been a very bright spot for our growth. Last year, in the first quarter, it was about $38 million of economic net income. This year, it's up to $104 million of economic net income. Now in that business, it doesn't immediately translate into Distributable Earnings, none of our businesses actually do, but in that one particularly, because a lot of that economic net income comes from our hedge funds. And the hedge funds have the -- are going to realize their performance fees, and hence, their Distributable Earnings are in the fourth quarter. So the gap between ENI and DE for that business is strong -- is big, and I'd say the business is strong. I think it's also benefited, of course, from the CLOs we're launching. The CLO market was dead for about 3 years. We launched about 4 of them last year. I hope we'll do more than that this year. And as I said, the hedge fund performance early in the year has been very strong.

On the Real Assets that you were mentioning, let me just make a reference to our energy. It was we who, about 12 years ago, recruited some people from Goldman Sachs to create Riverstone. And it was an extremely successful venture by any measurement. They are very, very well regarded in the market, and they've made a lot of money for themselves, their investors and for us and our investors. When we decided to do a different approach to energy, we decided to have a multi-pronged approach. We now believe we have as good an energy approach as anybody in the private equity world. Let me just briefly mention what it is. We have, with NGP, a very strong, 20-year performing team that really specializes in North American oil and gas. It's as good as anybody's, in our view. Second, we have Energy Mezzanine Fund that raised $1.4 billion in its first fund and is doing very well investing that. Third, we have a power group, which is a group that we bought from Goldman Sachs, but we've added a lot to it, and we've raised a lot of money for it, in terms of its investments, and that is something that is going to be a major force for us at Carlyle. And we've just announced our international energy team. This is a team that we've worked with before, through Riverstone, and other ways, and we believe that their ability to invest outside of the United States will be among the best in this particular private equity energy business. So those 4 prongs, plus our U.S. buyout business and our small buyout business, both of which have energy capabilities, we think places us second to none in the energy investment world in private equity. And that is really going to be one of our real strengths going forward.

Great. And then final question for me. On the high net worth and retail efforts, just given we're still so early in that broader opportunity, just could you -- David, could you help us frame what your goals are and what you deem to be a positive outcome as we track this over the coming year?

The high net work -- worth area is, obviously, one that all of our peers and we are very intensely focused on. It's not as if we didn't focus on it as much before, but today, because institutional investor fundraising is more complicated, more difficult and slower than before, this is an area where people have now focused. In our case, we are building a very large team, by our previous standards, to focus on so-called feeder funds. And those feeder funds are the ones raised by organizations like JPMorgan, Crédit Suisse and so forth. And we have an array of those, probably about 20 in the works or about to be launched. In addition, we are focused on organizations that are not quite as well known as JPMorgan, they might be regional firms around the United States or outside the United States, where individuals may not be quite as wealthy as the clients of those very large organizations like Crédit Suisse, JPMorgan, Citi and so forth. And we have a team that's working on that as well. We expect it will be an increasing part of our fundraising efforts for years to come, and we will have, in effect, a separate group of investment professionals or fundraising professionals dedicated just to that. In other words, we're not going to mix people that do institutional with high net worth, because high net worth has grown to be such an important area. At some point down the road, as some of you may have heard me say, I do think that nonaccredited investors will ultimately be able to invest in private equity through 401(k)s and other things. That's not quite there yet, but I do think there's some impetus to that, and that will provide additional capital for people like us down the road.

Our next question comes from Robert Lee of KBW.

First question I had is maybe if you could just refresh us on -- you've got the $6 billion commitments between the U.S., the Asia and, I guess, the new financial services fund. But just refresh my memory on what your target is for the China fund and where you maybe stand on that one right now.

Well, we have an Asia buyout fund that [indiscernible].

Right. I'm sorry, Asia buyout, sorry.

We have, on the cover, $3.5 billion, and we've had closings on that already this year. We expect that, that fund will have -- start to turn on fees beginning June 1. We expect that we'll reach the target. The current number's about $1.5 billion. In terms of the U.S. buyout fund, it's been our flagship product for a long time. Maybe David can talk about that.

The U.S. buyout fund has $10 billion on the cover. As we said in the opening remarks, we are highly confident we will get to that. We have closed, I think, on 6.1 -- or $7.1 billion. And we have commitments in hand or a board approval or documentation underway, such that we believe it's very realistic, before the next quarter, that we will probably have closed on about $9 billion. Obviously, something could go wrong and some committee could change what we now expect to happen, but we do think that about $9 billion, by the end of this quarter, is not unrealistic. And clearly, we have more to go from there. All of our major investors that we've been focused on seem to be coming into the fund, we're quite happy with that. And whether we go above the $10 billion, we haven't really decided. We have the right, under the terms of the documents, to go to $12 billion, plus our own money, which is about $1 billion. But we haven't decided whether we'll take it past $10 billion or not. It depends on demand and other factors. In Europe, we have the cover there of EUR 3 billion, and EUR 3 billion, which is about a little more than $3.5 billion I guess, close to $4 billion, yes. We are moving towards our first closing there. The fund has appreciated dramatically in the last year or so. At one point, I think it was as low as $0.62 on the euro. It's now about $1.3 on the euro, and therefore, it's doubled in value, and they've had some pretty good exits recently and pretty good deals announced. So we expect our first closing will be later this year, and I am confident that we'll get to our eventual target. It won't happen all by this year, but sometime next year, I believe we will complete the fundraising for that. I would add, by the way, on European private equity, that has been challenging for everybody. Now there are very few American groups, who's based in America, which are raising dedicated European funds. I think there are only 2 others that really have dedicated groups. And I think among those, I think we're very comfortable that we will be able to raise our target that we said, about EUR 3 billion.

And we've got about 10 other funds in the market, but those are the big 3.

Right. Great. And maybe -- I mean, you guys have very broad LP base. But just kind of curious, as you look at these funds, is there any incremental color you can provide on kind of how the client mix is shaping up, 75% from existing, but you're seeing a healthy inflow of new relationships.

Divided into 3 areas, to begin with. One, after the great recession, it was basically almost impossible to raise very much money, and it was truly hand-to-hand combat, and nobody in our industry was doing all that well. In the last 2 years or so, investors are coming back. They're slower in making their decisions than some would like, and they ask for terms that are less favorable in some respects than some of the general partners might like, but the money is coming back. Historically, the biggest investors were public pension funds in the United States. And I suspect they are still the largest single investor group but probably declining in their percentage. What's increasing is sovereign wealth funds, which now account for about 7% of all private equity funds capital, and individuals that I mentioned earlier. We're also seeing investors now coming to us with a lot of ideas on their own, perhaps, for separate accounts, other things, but our main focus has been raising these large funds that are main buyout funds, and we'll get them done on schedule, I believe. I think nobody in the private equity fund-raising world is saying that it's a walk in the woods raising money today, but it is different, and investors now have money. They are willing to invest. They'd like better terms they might have gotten years ago, but they are back.

And I think also, to just add to that, in a world, really, of almost no return, I mean, if you look at sovereign bonds around the world, the U.S., Japan, Europe, they are very, very low. The preferred return that's offered by a lot of the alternative asset products is a big, big attraction for a lot of investors around the world.

Great. And maybe one last question. Just curious on the tax and the regulatory front and -- I mean, besides carried interest tax, which is always out there, is there anything that you see that is of particular concern, maybe anything you're hearing about discussions around taxation of your partnership structure? Or just trying to get your read of the regulatory and tax landscape.

Well, if you say I have to worry, I've got 50 things I'm worried about right now. Probably that would be not even a top 50 right now, just because I do not believe that there is going to be comprehensive tax reform in the near term, and I don't believe that Congress is likely to deal with any of those type of issues on a one-off basis. Carried interest or partnership taxation, there just isn't an incentive right now in Washington or likelihood that, that will get addressed. So at some point in our lifetime, those issues might get faced by Congress, but I don't see it as a short-term, anything we need to worry about right now kind of problem.

Our next question comes from Ken Worthington of JPMorgan.

I think you mentioned -- and I hope I got this right, you're speaking fast -- that the pace of realizations will be weighted towards the end of 2013. And if that was correct, I was hoping you could flesh out your comments. It seems like credit equity markets are conducive for realizations. I think even Bill mentioned that economic indicators now look a little weaker than they did a quarter ago. So just maybe some color on why you see realizations as being a little more back-end loaded?

Let me try to explain what I was trying to say in language that we carefully crafted. Now, I will uncraft it a bit. But we had extraordinary distributions for 2 years in a row, distributions that some people thought just couldn't be sustained, in some ways because they were so high by any industry metric. I think it was roughly $33 billion of distributions back to investors. We are still likely to produce a large amount of distributions this year. And we don't want to say what the number will be, but we're very comfortable with our portfolio. It is in very good shape. We don't have portfolio issues or things like that. But we just don't want to sell things before we think it's quite right, and we're not going to time these on a quarterly basis. Let me explain what I mean. When private equity firms first went public, the principal concern that investors in their funds had is that assets would be sold to meet quarterly earnings desires of Wall Street analysts. I know it's hard to believe that you think you have that much power, but that is what the concerns of investors were, that we would, all of us in the industry, would worry about these quarterly numbers. We said at the beginning we weren't, and we still don't. So we are very comfortable that we're going to get the returns that our investors want, but we just don't want to make you think it's going to happen this quarter or next quarter. But for the year, given all the things we see happening this year, we are very comfortable that we're going to be at least where we were last year, and we're very comfortable that we're going to be able to get full value for our investors. But we just are nervous that people are going to say, "Well, how come you didn't do it in this quarter versus that quarter?" And we're just not focused on these quarterly exits honestly. That's all we were trying to say. So what we're trying to say, don't beat us up too much if it's not this quarter because it's coming, and the investors in our funds shouldn't worry about that we're going to do anything that's going to shortchange them. And the investors in our units shouldn't worry that they're not going to get the distributions that they ultimately want from our dividends and so forth. But it's just not a quarterly-by-quarterly kind of thing in the way we look at it. Bill?

I just would say we have the $13 billion public portfolio. We said it was up 13% in the first quarter. We've already done a couple of deals this quarter. I do think, Ken, that we have a strategy kind of on our public portfolio of trying to get our businesses public and then trying to sell all the way up. Initially, you go public, you're never happy with the valuation, everybody complains about the overhang or the lack of liquidity. If you do an offering, you put more liquidity in the market, you reduce the overhang, and hopefully, the price goes up. And that's been a strategy. I think on the public portfolio, we'll continue to do that.

Okay, great. And then, Bill, for you. You mentioned particularly low interest rates as being a kind of continued major theme. Given you're long-term success-oriented, is a bigger alt credit presence appropriate for Carlyle? And maybe how do you look at the growth prospects of alt credit maybe versus some of the other growth opportunities you're evaluating?

Well, I think it's interesting. Somebody might say, "Gee, with interest rates so low, what's really the opportunity for alt credit?" I think the alternative -- the opportunities are actually great because there's a lot of risk still in the credit. And people are willing to pay for people who can help them manage that risk. For example, on our CLOs, at one time, the -- raising the equity in the CLO was difficult. Today, investors really are very anxious for CLO equity. It's the -- the other parts of the capital structure can occasionally be more difficult to raise than the part that actually has the highest yield. Also, as you know, we have a big investment in TCW. And frankly, one would say, "Well, gee, how are they growing their bond business and their credit business in a very low interest rate environment? Who would ever pay a fee during this very low interest rate period of time?" And yet the business is growing dramatically, people realize they need a pro to manage it.

Let me just add to that, that we have built out our private equity platform, actually, as much as you can possibly want it to be built out at this point in time. It's -- we have buyout funds and growth capital funds almost everywhere. We are adding to some of them, of course, in certain areas, but it's a very large complement of funds in that area. The greatest growth we're likely to see percentage-wise is probably going to be in our credit business because we have a lower base. And the reason we think it will be attractive is this: at some point, interest rates are going to go the opposite direction. And when they go in the opposite direction, some investors will say, "Well, the interest rates are higher now. Returns might be better from fixed-income instruments." Those people that have good platforms in that area, I think, will benefit, just as TCW will benefit as well in one of our portfolio companies. So we do think that we have more that we can build there, and we do think that interest rates, at some point -- we don't know when -- but at some point, will come turn around, and at that point, the fixed income business will be even more attractive.

Our next question comes from Matt Kelley of Morgan Stanley.

I was hoping -- given your comments on kind of the backdrop of the economy and especially Europe, I'm just curious, when you're talking to LPs as you're fundraising for your latest funds, what sort of returns are they expecting, given what you're kind of telling them? And what are you advising them as to expect for your latest funds on the buyout front?

It's interesting. A couple of things I'd respond to that. First of all, I think we're still trying to earn gross returns of over 20% in our buyout funds for our investors. I always tell investors that, "Gee whiz, it's going to be very tough to do. We've done it for 25 years. I don't know if we can keep doing it," and yet somehow, we've been able to keep doing it. And based upon what I see now, I think that we're still going to be able to continue to produce gross returns above 20%. When you specifically talk about Europe and what do the investors say there, I think most investors have figured out that the investment environment is different than the economic environment. And then you can have an economy that is, as I mentioned, still contracting, and yet on the other hand, you can make very good investments. And I think the investor base really understands that and the like. I might finally close by saying that, although we're trying to earn 20%, I actually think most of our investors would be happy with a lot less than that. And if we ever come to a position where we don't think we can do it, obviously, we'd tell the investors that we don't think we can achieve that anymore. But for now, I think we can.

I would add that, how many of you on this call would be disappointed if you could get 17%, 18% net rates of return on your investments? Probably not too many. Most investors today are very happy, I think, in private equity to get high net teen rates returns because, given all the alternatives that are available to them, nothing else is consistently able to produce that. So investors have lowered their expectations a bit, and I think that's probably making our fundraising a little bit easier.

Great. That's helpful. And I'd definitely be happy, personally, with those returns, so point well taken. So just a quick follow-up then on Europe. Are there any pockets of opportunities where you're seeing not much supply enter the market, where you think if somebody is willing to take enough risk, there's huge potential returns, that LPs would actually give you money to invest and that they have the appetite for?

Yes. I would say that there are a lot of things going on in Europe. I think, first of all, the banks still are big sellers of a lot of their assets. I think they have been and will continue to be, they need to delever. For example, we bought TCW from Société Générale. We bought our stake in NGP from Barclays. I see the banking business in Europe, but there, for example, we have our own individual who specializes in financing that finances all our companies there. We find, in Europe, we really have to arrange the financing ourselves. In the United States, if you want to raise $500 million, there's 10 people that stand up with their hands and say, "I'll take it all." In Europe, if you want to raise $500 million, you have to cobble together a syndicate, $50 million apiece, that you're going to actually do yourself. I think the greatest opportunities, actually, in Europe are in the periphery rather than in the center. We have a pretty good deal flow now in Europe, and we hope to take advantage of it.

Great. And then one last follow-up for me. When you were talking about high net worth in retail, I'm just curious to get your thoughts on structuring those allocations for those investors, in terms of feeder funds versus 40 Act Funds versus ETFs. Any thoughts there on kind of how you think that will evolve going forward?

It's hard to say right now, but there are a number of vehicles in the markets, and we'll see which ones are most appealing. Some investors really want to be in 40 Act Funds, some are happy to go into private equity funds. It's a different mix. You have to remember, when you're talking about high net worth individuals, you really have 3 different categories. You have people who have family offices, that are people who have net worth’s of $500 million or more and have family offices, and they have a different perspective that people that might be able to put in maybe $1 million into a fund, and then a different perspective still yet for people who can put in maybe $200,000 into a fund. And so we do have products for people that are interested in putting in $50,000, $200,000, $1 million or much larger. So it depends on the individual. I don't think it's clear yet which one will prevail or if anyone will prevail. It just depends on the nature of the investor and how much money they have and their risk appetite. But it's occurring all over the world. I should say that these feeder funds that are being raised are not being raised so much in the United States, though that's a major part of it, it's all over the world. And our people who are making presentations for feeder funds are going to all parts of the world. Every continent, everywhere, we're seeing appetite for these kind of products right now, not just in the United States.

Our next question comes from Marc Irizarry of Goldman Sachs.

David, can you talk about the -- maybe how much the defined benefit and pension plans are of your assets today? And then as you look forward to the shift in fundraising activity to more global clients, to more maybe individual investors and high net worth investors over time on a global basis, and then you think about your competitive edge as having a global platform and lots of different offerings in private equity in the market all the time, how built out is the business for the shift away from -- maybe DB to some of those other sources of capital? And how built out is sort of your product, your product offering on the PE side and the platform build outs?

Recently, the State of Georgia, its state pension fund came into a decision to invest in private equity. That was the last of the 50 state pension funds that would allocate money to private equity. In other words, all 50 states have pension funds, and all 50 are in private equity. And therefore, it's a fairly mature market in the sense that people have allocations. Some of them have very large allocations. I think the State of Washington has a 25% allocation. California [ph] has a 14% allocation. And while they've had some denominator issues and are not quite able to invest as much as they would like to, in some cases, because their -- the value of the overall corpus of the fund has gone down, it's a reasonably mature market. There aren't a lot of new pension funds that are growing dramatically in the United States. If anything, they are underfunded. And while the underfunding fuels people to want to put money into high return kind of things, the greatest growth in the pension fund business is outside the United States, and there are 2 reasons for that. One, our organizations outside the United States or countries outside the United States are growing dramatically the amount of pension fund money that they have, because they've either put taxes on people to do that, as in Canada -- the Canadian pension plan is now $185 billion and growing pretty rapidly because of the tax in Canada. Or you have a second phenomenon, which is that for the first time, some pension funds are now allowed to invest in international private equity. For most of their time the Chilean pension funds, the Peruvian pension funds, the Colombian pension funds and the Brazilian pension funds, to mention one continent, were not allowed to invest in international private equity. And that has now changed, including Mexico. So now you have a wealth of pension funds outside of the United States that are now investing in this area. I do think that, gradually, you'll see the percentage of U.S. pension fund money in the United States going down relative to the other sources of capital. It’s still a large source of money, and probably for the next 5 years or so, I don't see anybody being bigger than U.S. public pension funds as a source of capital for firms like ours, but it is declining, and they are just being replaced by sovereign wealth funds, high net worth individuals and international pension funds. So for us, the defined benefit plans are roughly about 28% of what we have. And that, I'd say, is roughly consistent with what I think other comparable firms have right now. But I suspect, as a percentage, it will be going down.

Okay. And then I guess the question related to that is that, if you look at some of the initiatives that maybe are impacting fee-related earnings this quarter, and clearly, you can even make up for it with fees on CP V, for example, how -- when you think about the shift in fundraising activity to more global and more individual investors, how much of the expenses, that sort of we saw this quarter, are fixed -- are sort of fixed to build out your distribution platform, your product offerings on a more global basis?

Well, clearly, as we make it even more global than it has been -- and most of our fundraisers, the majority of them, are actually outside the United States. We have more fundraisers outside the United States because that's how we built our system to some extent. There's more money outside the United States for everything we're doing than, actually, in the United States. So we've had more fundraisers outside for quite some time. The cost is really due to 2 factors. One, we do have to expense this right now. So if we pay various fees to people to help us get fundraising done, we have to reflect it right now. And that's one that has some impact to earnings. So it's a double-edged sword. The more money we raise, the more impact it's going to have on our quarterly statements. And we're raising a lot of money, so it does have some impact. A second factor is that we are building out different networks of people, particularly for high net worth individuals, and that we're going to add some resources there. So it would have some impact for a while, but in the end, if we're not able to raise money, we won't have the seed kernel to kind of do what we want, so it would take some expense to do it, but we think it's well worth the expense we're putting into it. And I should have added, by the way, on the defined benefit plans, the defined benefit plans are still going to be a large source of capital for us. But if you go to defined contribution plans, as some states are, and eventually you'll see, in the United States, much more defined contribution plans than defined benefit over a period of many years, it's not precluded that these defined contribution plans cannot invest in private equity. At some point, I do think the mechanism will evolve so that unaccredited investors or nonaccredited investors will be able to have a check off for some putting some money into private equity funds, even though the private equity funds are typically reserved for accredited investors today. That will change, in my view, in the next couple years.

Okay. And then just on the 5-year-old-plus capital, and I think you called out that $27 billion or 44% of the PE is 2008 or older, vintage. I feel the answer to this is going to be no, but do you have a -- can you give us a sense where that piece of the portfolio is marked, maybe how much of it is public versus private, or even the performance of those assets this quarter? Because clearly, it's more aged capital, and I would think that that's sort of on the common terms of distributions and carry that you should get from that.

We do not actually publish what the MOICs are by vintage of investment. We tend to -- we obviously show you what the MOICs are by venture [ph] of fund. And if you do look at our older funds, they tend to have a higher MOIC just because of the J curve effect. But -- so I think that it's probably safe to assume that, even though the overall MOIC of our current portfolio, the fair market value of the portfolio on the ground today is about 1.3x, that the MOIC of that investment's done to have made [ph] or earlier is probably significantly above that, but I -- we don't publish it. We don't give you that by vintage.

[Operator Instructions] Our next question comes from David Chiaverini of BMO Capital Markets.

Could you comment on portfolio company EBITDA and revenue trends in the first quarter and what you're seeing thus far in the second quarter in light of the economic indicators being a bit weaker than observed a quarter ago?

Well I'd say -- once again, I would say that our portfolio can be different than the economy. But having said that, many businesses are struggling a little bit to grow the top line revenue, whereas the EBITDA continues to have reasonable performance. It can vary pretty dramatically by industry and by geography. And I think it's highly likely, of course, over time, that our economic indicators do affect the portfolio, which I said I thought was slightly weaker than we thought 3 months or so ago. But so far, it hasn't appeared very much in our overall portfolio performance in terms of our EBITDA growth.

Okay. And one for David. You mentioned about continuing to expand the Carlyle platform, and you talked about building out the in-house energy effort. Are there any other areas that you're looking to grow?

You mean like energy?

Yes. Any other areas, whether it's technology or further expand real estate or any other areas that...

Well, we have some, but we're not prepared today to announce them, so stay tuned. But obviously, we're always looking for trends, and if we can find something half as good as energy, we're certainly going to pursue it. We are working on some, but we're just not prepared today to announce anything. But at some point, I wouldn't be surprised if we did something else that would be attractive to our investors and to people that cover our stock. But we're not prepared to announce anything today.

And if you have any good ideas, his email is david.rubenstein@carlyle.com.

And with no further questions at this time, I would like to turn the conference back over to Mr. Daniel Harris for any closing remarks.

Thank you for your time this morning. Should you have any other questions, feel free to contact Investor Relations, and we look forward to talking to you again next quarter. Thank you all very much.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect, and have a wonderful day.