The Carlyle Group Inc.

Good day and thank you for standing by. Welcome to the Carlyle Group fourth quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Daniel Harris, head of investor relations. Please go ahead.

Thank you, Shannon. Good morning and welcome to Carlyle's fourth quarter 2021 earnings call. With me on the call this morning is our Chief Executive Officer, Kyu-Sung Lee, and our Chief Financial Officer, Kurt Buser. Earlier this morning, we issued a press release and a detailed earnings presentation, both of which are available on our investor relations website at ir.carlyle.com. 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 presentation 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 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. Turning to our results, for the fourth quarter, we generated $174 million in fee-related earnings and $903 million in distributable earnings with DE per common share of $2.01. We produced net realized performance revenue of $683 million and entered 2022 with an accrued carry balance of $3.9 billion. And for the full year, we generated $598 million in FRE and $2.2 billion in distributable earnings, with DE per share of $5.01. We declared a quarterly dividend of $0.25 per common share. To ensure participation by all those on the call, please limit yourself to one question and one follow-up, and then return to the queue for any additional questions. And with that, let me turn the call over to our Chief Executive Officer, Kyu-Sung Lee.

Thanks, Dan. Hello, everyone, and thanks for joining us today as we discuss our fourth quarter and full year 2021 results, as well as provide line of sight into 2022. We started last year by laying out our strategic plan for future growth, and I'm pleased to tell you that we are delivering on our goals. We had an exceptional 2021 with records across the board in fee-related earnings, distributable earnings, and every major investment metric. I am proud of our people and the results they have collectively produced. Our fourth quarter performance caps this strong year and illustrates the powerful growth trajectory across our more diversified platform. I want to highlight the key drivers underpinning our record year as our FRE has grown to new sustainable levels, our growth initiatives are starting to pay off, and our performance has set the stage for robust distributable earnings over the next several years. Let's start by underscoring our investment performance with valuations increasing 41% year-over-year and realizations of $44 billion across all of our traditional carry funds. Portfolio construction continues to be a strength, especially as we enter a period of greater volatility. We're investing more capital as we expand our aperture and leverage even more effectively our global scale and sector expertise. This has resulted in record investment activity. We deployed $14 billion in Q4 alone and $34 billion in 2021, each a record. This investment performed the ability to send realized proceeds back to our limited partners has helped their fundraising efforts. In 2021, we raised $51 billion, nearly double what we raised in 2020. We aim to continue this momentum over the next few years as we focus on the substantial upside potential to our Investor Day target, which would help us drive financial results beyond our FRE ambitions. Alternative sources of capital formation such as high net worth, retail, open-ended funds, permanent capital, and insurance represent upside and are an increasing source of fundraising dollars as we pick our spots to grow these sources of capital. Stepping back, the headline is, we ended 2021 with strong fundraising momentum that will carry over into 2022. Our extraordinary performance across the board has established a new level of earnings power, which gives us the confidence to raise our dividend substantially. You'll hear more on this from Curt later. More importantly, this performance also gives us the resources to continue investing strategically to build a firm and accelerate growth. Now turning to strategic growth opportunities, our investments in global credit are paying off. both organically and through strategic acquisitions. For example, our credit opportunity strategy has grown to $8 billion in about four years, and with Carlyle Aviation, we expect FRE to triple in three years since the acquisition. The growth continues with our energy now focused on building out infrastructure credit, which we are doing organically, and jump-starting growth in real estate credit. Another scalable platform initiative is Fortitude, which continues to progress as planned. And given the current activity level and pipeline, we are confident that 2022 could be a breakout year for this very scalable permanent capital platform. Several years ago, we asked for patience as we rebuilt our global credit platform. We're using the same playbook in other areas like infrastructure and renewables where we see significant room for growth and similar fortitude anticipate an active year. Finally, our focus on building the firm includes investment and leadership in impact and ESG capabilities, which are increasingly required to drive returns and meet the needs of our LPs. At Carlyle, ESG is not one fund or product, but a part of everything we do. One example is the ESG Data Convergence Project, announced in partnership with CalPERS in September 2021, which has reached a milestone commitment of over 100 leading GPs and LPs globally to its partnership, representing $8.7 trillion in AUM and over 1,400 underlying portfolio companies. And just this week, Carlyle took another important step as one of the first in our industry to announce its commitment to achieve net zero greenhouse gas emissions by 2050 or sooner across direct investments. By integrating an ESG mindset across the firm in our investment processes and throughout our value creation, our approach benefits all stakeholders. To wrap up, we entered 2022 better positioned than ever before. Carlyle is a stronger and healthier firm today because of our 2021 progress. Our focus remains on continuously improving how we drive value and generating attractive returns. and we are confident in our ability to grow FRE, drive investment performance and strategically build the firm for future growth. We are focused on building the best investment firm possible and running it better than ever before. As the environment continually shifts around us, our diversified investment platform and global team have demonstrated resilience and adaptability. I remain confident in our ability to thrive and capture opportunities in any environment. I'm proud of our team, and we remain focused on continuing to deliver for shareholders and all stakeholders. I appreciate the hard work as we accelerate our activity for another very active year of executing on our vision of thinking bigger, moving faster, and performing better. Over to you, Kurt.