The Carlyle Group LP (CG) Q3 2021 Earnings Name Transcript

The Carlyle Group LP (CG -4.79%)
Q3 2021 Earnings Name
Oct 28, 2021, 8:30 a.m. ET

Contents:

• Ready Remarks
• Questions and Solutions
• Name Members

Ready Remarks:

Operator

Thanks for standing by, and welcome to the Third Quarter 2021 Carlyle Group Earnings Convention Name. [Operator Instructions]. As a reminder, at present’s program could also be recorded. I’d now prefer to introduce your host for at present’s program, Daniel Harris, Head of Investor Relations. Please go forward, sir.

Daniel F. Harris — Managing Director and Head of Public Investor Relations

Thanks, Jonathan. Good morning and welcome to Carlyle’s Third Quarter 2021 Earnings Name. With me on the decision this morning is our Chief Government Officer, Kewsong Lee; and our Chief Monetary Officer, Curt Buser. This name is being webcast, and a replay will probably be out there on our web site. We are going to discuss with sure non-GAAP monetary measures throughout at present’s name. These measures shouldn’t be thought-about in isolation from or as an alternative choice to measures ready in accordance with typically accepted accounting ideas. We have now supplied reconciliations of those measures to GAAP in our earnings launch. Any forward-looking statements made at present don’t assure future efficiency and undue reliance shouldn’t be positioned on them.

These statements are based mostly on present administration expectations and contain inherent dangers and uncertainties, together with these recognized within the Threat Components part of our annual report on Kind 10-Ok that might trigger precise outcomes to vary materially from these indicated. Carlyle assumes no obligation to replace any forward-looking statements at any time. Earlier this morning, we issued a press launch and an in depth earnings presentation, which can be out there on our IR web site.

It updates the progress we have made and the momentum we’re constructing on our strategic plan to assume greater, transfer quicker and carry out higher that we introduced at first of the yr. For the third quarter, we generated $151 million in fee-related earnings and $731 million in distributable earnings, with DE per frequent share of $1.54. We declared a quarterly dividend of $0.25 per frequent share. And with that, let me flip the decision over to our Chief Government Officer, Kewsong Lee.

Kewsong Lee — Chief Government Officer and Director

Thanks, Dan. Whats up, everybody, and thanks for becoming a member of us at present. We’re excited to have one other alternative to replace you on the good progress we’re making in opposition to our strategic plan and the document firmwide earnings efficiency we delivered this quarter. Our third quarter outcomes are distinctive throughout all three of our companies with continued and sustainable progress in FRE, the best manufacturing of quarterly distributable earnings ever, and powerful fund-raising momentum. These outcomes construct upon an excellent first half of the yr and illustrate the highly effective upward long-term progress trajectory, our diversified platform can ship.

As an replace, let me begin with three vital factors. First, we’re forward of schedule on our strategic plan throughout all of our companies. Second, our concentrate on FRE and funding efficiency is paying off for all stakeholders. And at last, one essential issue within the success is that we’ve got constructed an aligned, various and skilled management workforce who’re working our world agency. Considering greater, transferring quicker and performing higher is our mantra. It’s serving to us ship on our priorities. Our strategic plan is already resulting in sturdy outcomes proper out of the gate. And extra importantly, we imagine it positions us to ship continued earnings progress and powerful funding efficiency over the long run.

The second and third quarters have been document breakers for us, and we see continued progress from right here. Simply this quarter, we achieved document AUM of $293 billion And year-to-date, we invested a document $20 billion and realized a document $29 billion. What we’ll describe to you at present displays our progress, and we stay laser-focused on persevering with to execute our longer-term targets. We have now line of sight into how our strategic plan will generate progress and imagine we are able to proceed our momentum to ship enticing outcomes for our stakeholders. As we generate an rising degree of retained earnings from sturdy DE over the subsequent a number of quarters, we’re actively assessing alternatives to spend money on our platform to drive extra sustainable FRE progress that expands on our strengths. We proceed to construct the workforce and infrastructure to make sure we’re finest positioned to pursue the correct progress alternatives for Carlyle.

I’m assured that we are able to develop each organically and thru strategic acquisitions to diversify our companies, construct new drivers for future progress and improve our sustainable degree of FRE. At this time, as you pay attention and analyze our ends in commentary, please pay shut consideration to the accelerating exercise throughout all three of our world companies. We’re investing, creating worth, returning capital via realizations and fund-raising at ranges that drive line of sight to accelerating progress in earnings. In regard to our investing, we see vital progress alternatives forward. The reason being this: huge change is impacting industries and asset lessons world wide and producing distinctive funding alternatives for personal markets, which is the backdrop for our document funding tempo.

And our trade continues to ship funding outperformance, as demonstrated by Carlyle’s carry fund appreciation of 33% year-to-date. Moreover, we’re higher competitively positioned than ever earlier than. As a worldwide and diversified funding agency working at scale, our platform method permits us to seize alternatives by deploying capital to the sectors and areas of the worldwide economic system which can be essentially the most enticing. Companies in these sectors are benefiting from the acceleration of disruptive change, and we’re capturing these alternatives throughout all of our funding methods and investing capital extra effectively. We’re particularly centered on tendencies which can be converging, specifically in key sectors of the economic system like healthcare the place expertise continues to generate progress and societal advances. We’re additionally main into extra conventional energy alleys like industrials and shopper, the place we’re bringing a contemporary method to incumbent companies and enabling quicker progress for newer disruptive firms.

Moreover, secular tendencies like sustainability provide us the chance to spend money on the way forward for renewables whereas additionally participating within the huge transition that’s underway. Demographic shifts like rising home consumption in China current vital funding alternatives, as do economies in transition like India and Japan. And the potential for elevated market volatility or increased rates of interest is more likely to create enticing funding alternatives throughout our world credit score platform, the place we’ve got grown to a document AUM of $66 billion, which is greater than two instances bigger than it was lower than 4 years in the past. Now in regard to fundraising, I wish to underscore we’re speaking and dealing with our restricted companions higher than ever earlier than and have raised $40 billion thus far in 2021, a rise of 124% year-to-date over 2020.

We are going to search to proceed this momentum over the subsequent few years. And if we’re profitable, this would supply substantial upside potential to our four-year $130 billion-plus fundraising goal and drive outcomes past our FRE goal. We lately hosted our Annual World Investor Convention with 1,000 LPs becoming a member of world wide in a hybrid format. It was nice to spend time in individual with individuals in New York Metropolis and Hong Kong. We’re inspired by their suggestions and the headline is that this: Buyers clearly need the methods and options we’ve got to supply throughout all three of our world companies. Our World Credit score phase’s broad spectrum of credit score methods positions it nicely to develop because the market continues to shift away from conventional mounted earnings to personal credit score.

Our World Funding Options phase has the size, world attain and knowledge to drive portfolio optimization methods which can be extra vital than ever in a world the place personal capital has turn into mainstream in a good portion of our buyers’ portfolios. And in World Personal Fairness, we’re a modern-day builder of companies with extra worth creation levers than ever earlier than to drive efficiency, which is essential in a market the place competitors is fierce and valuations are excessive.

In atop of all of this, We imagine we’re an trade chief in integrating ESG all through our agency and our funding processes and all through our worth creation processes for the good thing about all stakeholders. That is all about making the whole lot we contact higher, together with placing as a lot focus into how we run Carlyle as we do our portfolio firms. Finally, we’re driving enhancements and alter throughout our complete enterprise, leading to higher selections, outcomes and efficiency for all stakeholders. Curt will now stroll you thru the monetary highlights for the quarter and supply extra particulars on what drove our document outcomes.

So I will wrap up with this. The agency is in nice form. We’re extra world, extra various and within the midst of a generational evolution at a brand new Carlyle, the place our focus is on constantly enhancing how we drive worth and producing enticing returns. We’re forward of schedule on our strategic plan. Our concentrate on FRE and funding efficiency is paying off, and our platform is benefiting from the expansion initiatives to diversify our earnings. I’m happy with our workforce who’re doing a terrific job of executing and delivering on our priorities. I recognize the exhausting work to speed up our exercise for the stability of this yr and into 2022. Thanks. Over to you, Curt.

Curtis L. Buser — Chief Monetary Officer

Thanks, Kew, and good morning, everybody. As Kew stated, this quarter’s standout efficiency is the results of a transparent concentrate on executing on our strategic plan. To set the stage, our sturdy momentum in fundraising, document tempo of capital deployment and string of profitable realizations are driving a major improve within the scale of our earnings. These outcomes are underpinned by enticing funding efficiency and are fortifying our stability sheet to assist us ship long-term sustainable progress in our world platform and fee-related earnings.

Now let’s dig deeper into our document third quarter earnings. I wish to underscore the broad-based energy throughout all elements of distributable earnings, fee-related earnings, realized efficiency income and funding earnings. We delivered document pre-tax distributable earnings of $731 million this quarter. To place that in perspective, that’s greater than the whole thing of the primary half of 2021 and is greater than 50% bigger than any prior quarter. Our outcomes are greater, quicker and higher than they’ve ever been.

Yr-to-date distributable earnings of $1.3 billion outpaces our full yr efficiency in any yr since our IPO by practically 40%, and that is with out even accounting for what’s shaping as much as be a powerful fourth quarter. On an after-tax foundation, we generated a document $1.54 in DE per share for the quarter. Transferring on to the elements of distributable earnings. Let’s begin with fee-related earnings, which was $151 million within the quarter and $424 million year-to-date, up 23% in comparison with 2020 excluding the affect of litigation price recoveries within the first quarter of final yr.

We count on administration charges and fee-related earnings to maneuver increased subsequent quarter as we activate charges on our newest era U.S. actual property fund and our new U.S. buyout and progress funds. Total, we count on sturdy FRE progress over the subsequent a number of years and are on observe to hit our 2024 $800 million FRE objective sooner than beforehand anticipated. The World Funding Options phase practically doubled year-to-date FRE to $64 million s sturdy fundraising and deployment drove a 22% improve in year-to-date administration charges with excessive incremental margin.

The year-to-date FRE margins expanded to 37%, practically 13 proportion factors increased year-over-year. World Credit score grew payment revenues by $13 million and FRE by $8 million simply since final quarter, a 30% sequential improve in FRE pushed by sturdy capital elevating and lively deployment throughout the platform, together with document ranges of direct lending origination and document ranges of CLO issuance. In Carlyle Aviation, we accomplished the FLY acquisition, our largest fleet acquisition ever. Turning to World Personal Fairness, we count on FRE to speed up subsequent quarter and proceed to develop all through 2022 as we profit from sturdy fundraising momentum by activating charges later within the fourth quarter on newly raised capital.

The constructive affect from our capital market technique is changing into more and more seen because it additional integrates with all our world funding groups. Internet transaction and advisory income of just about $60 million year-to-date was practically double final yr, and we count on fourth quarter underwriting exercise to once more drive vital transaction payment era. Total, our FRE margin of 33% year-to-date is up about 500 foundation factors over the previous couple of years and is solidly on path towards our 40% goal, which we’re additionally more likely to attain sooner than beforehand anticipated. Internet realized efficiency income of $534 million is way and away a document quarter and was pushed by $14 billion in realized proceeds.

Importantly, we proceed to have $204 billion in remaining truthful worth throughout our portfolio, which positions us to generate a excessive quantity of realization exercise over the subsequent few years. Within the third quarter, we accomplished personal gross sales throughout quite a lot of funds and geographies, with realizations of enormous buyout investments like Nevada and Bountiful and progress methods like NetMotion and Newport Healthcare and the continued exercise throughout our U.S. actual property platform. We additionally took benefit of sturdy markets and distinctive funding efficiency with public secondaries, together with ZoomInfo, Ortho-Scientific and SBI Card. We have now a major backlog of realizations that ought to shut over the subsequent few quarters.

And we count on to generate at the least $450 million in web realized efficiency income over the subsequent two quarters, simply from already introduced gross sales, with probably vital upside from additional realizations from our $19 billion public fairness portfolio. We proceed to have faith in our capacity to generate a excessive degree of annual web realized efficiency revenues over the subsequent a number of years. Accrued efficiency income stays close to a document degree at $3.9 billion, down modestly in comparison with final quarter regardless of document realizations as our funds proceed to carry out and recognize.

At this degree, the web accrual represents greater than $11 per share in future pre-tax earnings. We proceed to have sturdy fund efficiency in a fancy surroundings. Our World Personal Fairness portfolio appreciated 5% within the quarter and 31% year-to-date. This quarter, we noticed the strongest efficiency in actual property, which elevated 9%, and pure sources up 7%. Our broad CPE portfolio was up 4%, sturdy outperformance in opposition to the 1.5% decline for the MSCI All Nation World Index. World Funding Options had an excellent quarter as soon as once more, with 10% appreciation throughout their portfolio and is now up 39% year-to-date.

This quarter’s energy was led by secondaries and fund investments. And in World Credit score, we proceed to thrive, offering enticing danger/reward throughout the funding spectrum, the place our belongings beneath administration of $66 billion have greater than doubled over the previous a number of years. Realized funding earnings of $71 million within the third quarter displays the sturdy returns and rising dimension of our on-balance sheet investments, which totaled $2 billion on the finish of the quarter. Yr-to-date realized funding earnings of $139 million is sort of triple the identical interval in 2020, and we’re on observe to exceed our 2024 goal this yr.

Our sturdy earnings have fortified our stability sheet at a good time as we see a number of alternatives to deploy our rising capital base to speed up our FRE progress by investing in bigger funds, seeding new funding methods, supporting new enterprise actions and making the most of accretive M&A over time. Given distinctive earnings and our opportunistic debt issuance final quarter, we count on to prepay $250 million within the remaining 2023 bonds within the fourth quarter. This may additional enhance leverage and enhance our monetary energy.

To wrap up, we’re excited to be delivering on our plan and what meaning for our shareholders. We’re in reality outperforming our personal expectations. We imagine we’re nicely positioned to take action for the subsequent a number of years. Our sturdy momentum is permitting us to develop our FRE and our DE and spend money on Carlyle’s longer-term progress. We have now created an distinctive worth for shareholders, and we proceed to ship on this progress. Now let me flip the decision over to the operator so we are able to take your questions.

Questions and Solutions:

Operator

[Operator Instructions] Our first query comes from the road of Glenn Schorr from Evercore.

Glenn Paul Schorr — Evercore ISI Institutional Equities — Analyst

Hello. Thanks very a lot. Kew, it is solely been a couple of quarters however as you guys littered all through the dialog, a whole lot of your numbers are bumping up on the targets. Right here we’re ultimately of 2021 and the 2024 goal. So how can we take into consideration — it is nice that the markets and your efficiency has gotten there. Does that imply that we plateau for a short time? Or how do you concentrate on the momentum moving into and going via these 2024 targets in like 2021 or 2022?

Kewsong Lee — Chief Government Officer and Director

Hey Glenn, thanks for the query, and good to listen to from you. Look, we had a document quarter. We’re nicely forward of our strategic plan. And I actually do assume this momentum is sustainable as a result of we’re seeing nice exercise, nice power throughout your entire agency throughout all of our companies. We’re considering greater, our funds are rising organically, the place our initiatives in World Credit score and our new platforms for progress are actually taking maintain. We’re actually transferring quicker, not solely our funds occurring quicker, however you are seeing the outcomes are available quicker. And I believe this quarter talks to the outcomes. We’re performing higher.

It isn’t solely at a company degree with FRE, which has accelerated, and I believe we’ll proceed that path. However all of the exhausting work over time of placing collectively our investments, setting up our portfolios and dealing with our firms to create worth, it is actually paying off. So sure, the markets are strong and powerful proper now. However actually, the belief exercise is a testomony to all of the exhausting work that is gone into the bottom to do nice investing. And I believe all that efficiency simply continues. So throughout the agency, we see nice power, nice momentum and fairly frankly, very assured that this momentum is sustainable.

Curtis L. Buser — Chief Monetary Officer

Hello Glenn, it is Curt. And from my perspective, I do not assume I’ve ever been in a spot the place I’ve better confidence in what I am seeing going ahead, and that is actually continued sustainable progress. And let me simply offer you a couple of factors of what I am seeing. So first, proper now we’re sitting on $30 billion of AUM that hasn’t been activated. Half to two-third of that’s going to activate within the fourth quarter. And that can take our $150 million of FRE that we simply posted or a run fee of $600 million increased into 2022. In order that’s an excellent place to be sitting from my place. Second, from a web realized efficiency income standpoint, $3.9 billion of web accrued carry, plus $116 billion of remaining truthful worth within the floor throughout our conventional carry funds, actually helps progress in web realized efficiency income and the sustainability that we’ve got there.

And third, you possibly can’t underscore the range of the platform. The energy that is occurred in World Credit score and funding options actually will get a diversified enterprise out and going. And final, I am sitting on a a lot better stability sheet than we ever had, which actually offers us the firepower to develop sustainable FRE over time. And so the place can be on a glance ahead, it is a nice place proper now to have the ability to have faith in what we are able to do going ahead.

Glenn Paul Schorr, Evercore ISI Institutional Equities, Analysis Division-Senior MD & Senior Analysis Analyst 5

Okay, I actually recognize that. Possibly I might squeeze in a follow-up on simply — your capital elevating has been nice. You talked about about forward of goal. Are you able to discuss what you are at the moment doing within the wealth administration channels and what you want to that to be sooner or later? Certain. So let me take that, Glenn. So first, our fundraising, we’re on a document tempo. So $40 billion year-to-date, $50 billion during the last 12 months. And on that $50 billion, $14 billion in World Credit score, which has actually simply been clicking each quarter. Very properly, very diversified, document CLO tempo, however it’s not simply the CLOs, it is throughout the platform. Second, in Funding Options, World Funding Options, $11 billion during the last 12 months. You see the expansion in that platform. In the event you return in time, I imply World Funding Options was like one-third of what it’s at present. The expansion that we have had there has actually been vital.

After which clearly, $25 billion in World Personal Fairness during the last 12 months actually setting that enterprise additionally for additional progress. So let me be clear by way of what we’re by way of the retail channel and the like. Our plan is admittedly constructed on remaining centered on our institutional channel. It is long-term capital. It is extraordinarily enticing. It is driving our high line progress. If we execute our plan, our FRE goes to develop quickly over the subsequent few years, and we’ve got plans to have that develop thereafter. And at present, we largely goal retail via our excessive web price channel via feeder funds.

That is been very profitable over time. That channel has typically been very profitable due to our sturdy model, drives 10% to fifteen% of our capital elevating via these channels. However let’s be clear, our concentrate on FRE has actually produced outcomes. It has been rising 20% on a CAGR perspective during the last 5 years and stays so at present. And the fundraising momentum that we’ve got will proceed to permit us to develop our FRE and the enterprise.

Glenn Paul Schorr — Evercore ISI Institutional Equities — Analyst

Thanks very a lot.

Operator

Our subsequent query comes from the road of Invoice Katz from Citigroup.

William Raymond Katz — Citigroup Inc. — Analyst

Thanks for taking my questions this morning and the abbreviated feedback. Simply coming again to perhaps capital deployment, it sounds such as you may be gearing as much as be a bit extra acquisitive. And also you talked about issues like sustainable and additional FRE progress. In order that sounds to me like perhaps some potential everlasting capital alternatives. I used to be questioning should you might speak a bit of bit about kind of the place you see the chance? After which associated to Curt’s final commentary that your 2024 plan is geared to institutional, may there be a possibility right here to develop the retail as nicely?

Kewsong Lee — Chief Government Officer and Director

Hello Invoice, it is Kew. Massive image, we will be producing a whole lot of money onto our stability sheet over the subsequent a number of years as our realizations materialize. We’re going to take that money and search for methods to spend money on FRE-generative companies, to repurpose that stability sheet capital into sustainable progress companies that drive FRE. So massive image, that is what we’re seeking to do. I wish to remind you that not one of the targets that we have specified by our strategic plan takes into consideration for any strategic exercise. So all of that might simply be along with. And at last, I believe I’ve stated this prior to now, the doubtless areas are extra within the world credit score areas or in options versus personal fairness by way of the place we expect the alternatives can be. We’re interested by it very globally, and we’ll be in contact when one thing occurs. And with that, I will cross over to the second a part of the query to Curt.

Curtis L. Buser — Chief Monetary Officer

So on the capital markets piece, Invoice, our capital markets enterprise is doing rather well, actually underpinned by the better stability sheet capability that we’ve got to help that enterprise. You may see within the transaction income, about $60 million year-to-date, double final yr’s quantity. Two-third of that income is admittedly popping out of the capital markets enterprise, which is up from virtually nothing a yr in the past. In order that’s actually what’s inflicting that progress there. It is working very properly, and once more due to the stability sheet energy, permits us to proceed to develop. And so I am very assured in our capacity to get that up over $100 million within the subsequent couple of years.

William Raymond Katz — Citigroup Inc. — Analyst

Okay. Thanks.

Operator

Our subsequent query comes from the road of Alex Blostein from Goldman Sachs.

Alexander Blostein — Goldman Sachs Group, Inc. — Analyst

I will attempt to squeeze a two-parter in however all associated to the identical matter, which is fundraising. So I suppose Kew, massive image for you. Clearly, the flagship fundraising are going extremely nicely. However as you take a look at the enterprise over the subsequent type of two to 3 years, what are the methods that you simply count on to be type of fundraising on a extra steady momentum? Simply to type of give us a way that it is a new baseline after which we will develop up with that baseline.

After which only a numbers clarification query for Curt, are you able to simply give us an replace on the ultimate shut of the U.S. buyout fund? And I believe I heard you say type of how that is going to translate into FRE for the fourth quarter. However perhaps simply give us the items, type of like what’s income, what’s bills, type of how we take into consideration the contribution from the latest increase into the fourth quarter.

Curtis L. Buser — Chief Monetary Officer

So Alex, let me begin, after which Kew will take, so we’ll most likely deal with this a bit of bit in reverse order the best way you requested it. So first, as we have type of laid out, our fundraising momentum is unbelievable. And we’re monitoring to document ranges, and we’ll most likely have the ability to exceed our $130 billion goal or ship upon that sooner than we thought. We’re seeing distinctive fundraising in World Credit score and in World Funding Options and likewise in personal fairness, as you identified. And we’re seeing bigger raises. So we’re seeing the credit score alternatives fund coming stronger.

We’re seeing our actual property funds coming stronger, the secondaries enterprise inside funding options coming in stronger. So all of that has led to the doubling of year-to-date fundraising. With respect to particular funds that stay in fundraising, we will not actually touch upon these. And so with respect to U.S. buyout, and many others, I am unable to actually go into element apart from our total fundraising momentum is sweet. We will probably be activating charges right here within the fourth quarter. That may have a pickup. However issues that stay in fundraising, I am unable to offer you all of these specifics on the small print. However once more, issues are trying rather well.

Kewsong Lee — Chief Government Officer and Director

Sure, hey and Alex, look, just some higher-level commentary. First, the secular tendencies towards personal markets simply continues. And off our September convention but additionally latest street exhibits with LPs, the curiosity degree and the need to allocate into options into personal markets continues world wide throughout all methods. Second, LPs wish to deepen their relationships with their largest and most strategic GPs. And that pattern positions Carlyle exceptionally nicely. Third, we’re seeing large profit in cross-selling from one technique into one other with our LPs. And as our platform broadens and diversifies, we’re seeing increasingly alternative to try this.

Lastly, let me simply say with respect to credit score and in options, in credit score there actually is a shift occurring the place flows are transferring away from conventional public mounted earnings securities the place yields are nearly 0, into personal credit score options. And I believe that could be a secular pattern with actual tailwinds that we will profit from. And in options, as I stated in my opening remarks, options will not be different anymore. They’re mainstream. It is a massive portion of our LPs’ portfolios, they usually want portfolio optimization methods because it pertains to secondary options or co-investment methods to assist with deployment.

And all of that performs to our benefit with our very sturdy options phase. So I am seeing superb tailwind and secular forces, that are going to be an excellent momentum for our fundraising persevering with. And at last, I simply wish to say one last item. You can not do that with out nice funding efficiency. And we have got nice funding efficiency. Our portfolios are in nice form. They’re nicely constructed. Our groups are working very exhausting And I believe once you marry that nice efficiency with the forms of tendencies I’ve simply talked about, it bodes nicely over the long run for our fundraising momentum to proceed.

Operator

Our subsequent query comes from the road of Chris Kotowski from Oppenheimer.

Christoph M. Kotowski — Oppenheimer & Co. Inc. — Analyst

Sure. Good morning, thanks for taking my query. I suppose, I wish to return to remark about how as you understand these good points, the good points within the portfolio, money goes to construct up on Carlyle’s stability sheet. And traditionally, Carlyle paid that each one out to shareholders. And clearly, you’ve got been retaining all of it, and you’ve got pointed to the truth that you wish to do acquisitions. I suppose how do you weigh making acquisitions in opposition to the simpler and extra sure path of doing share buybacks and actually shrinking your float? I imply simply my again of the mathematics urged that simply this quarter’s overage versus your dividend would have been sufficient to retire about 2% of your inventory. And that might be 2% FRE progress with 100% certainty endlessly. So how do you weigh buying different individuals’s firms versus buying your individual?

Curtis L. Buser — Chief Monetary Officer

Chris, it is Curt. Let me begin, and thanks for that insightful query. Look, it is actually nice by way of the place we’re at present. The stability sheet is far, a lot stronger than the place it had been earlier than. And so the expansion in it in a really brief time period has actually been exceptional, which permits questions such as you’re asking to actually even be on the desk. So let me begin with a couple of fundamentals of type of the place we’re. First, you noticed that we simply elevated our authorization to purchase again shares.

So on January 1, there will be a $400 million authorization in place to purchase again shares. To be clear, we’re planning to make use of that to ensure that our dilution doesn’t exceed 1% per yr. And we’ll be aggressive the place that is sensible by way of shopping for again shares. Second, we’re going with this distinctive earnings that we’ve got, I acquired to pay some taxes. And so we will pay a bit of little bit of taxes. We’ll pay again some debt, however that is type of simply cleansing up and simply type of leaving us actually nonetheless on a very nice monetary place.

However how we evaluate, it is actually about driving worth for shareholders. And progress is admittedly being rewarded very considerably within the market. So I wish to use capital to drive progress in order that we’re driving worth. And the way can we try this? Nicely, we’re elevating bigger funds. And in order that requires extra capital off the stability sheet to cowl our share to lift bigger funds. We’re taking a look at newer methods. Initially, the stuff that is aligned with type of what we’re doing so our capital markets enterprise, the insurance coverage enterprise, all of that wants extra capital as nicely.

And so we have to have that to have the ability to develop. There are newer methods like infrastructure that whereas we’ve got, we expect can actually take benefit and develop that a lot bigger. That may require some capital. After which there’s M&A alternatives that Kew already spoke about. However ultimately, all of that is about driving sustainable FRE progress. And I imagine that, that will get rewarded within the market.

Kewsong Lee — Chief Government Officer and Director

Chris, it is an excellent query. And the way we repurpose that money and make investments it to develop strategically to drive FRE and drive progress is totally the larger image for what we have to do, clearly whereas investing nicely and working the agency nicely. Let me simply add to what Curt stated. It is all about being extremely strategic and extremely considerate with these acquisitions. and what we’re seeking to do. However I will simply level you to Fortitude, Carlyle Aviation, our CLO enterprise, AlpInvest.

These are all examples of actually good makes use of of our stability sheet cash to develop companies, that are scaling and rising. So what are the forms of issues that we’re searching for? Return to our strategic plan. We have been very clear from the start, we’re searching for massive markets which can be scalable, that generate recurring and sustainable FRE that we are able to develop. And that is my standards. And as our stability sheet will get stronger in a really purposeful and considerate manner, we do intend to search for strategic adjacencies that can prolong our platform.

Christoph M. Kotowski — Oppenheimer & Co. Inc. — Analyst

Okay, that is it for me. Thanks.

Operator

Our subsequent query comes from the road of Michael Cyprys from Morgan Stanley.

Peter John Kaloostian — Morgan Stanley — Analyst

That is Peter Kaloostian standing in for Mike Cyprys. Simply on comp restructuring, we have seen some friends make adjustments to their comp accruals, shifting extra comp to hold and lowering the comp that comes from FRE. Simply curious on what sort of state of affairs surroundings wouldn’t it make sense for Carlyle to do that? What could also be some challenges or drawbacks from making these kind of adjustments? Thanks.

Curtis L. Buser — Chief Monetary Officer

Hey, thanks to your query. Look, we’ve got a very good plan in place. We’re comfy with our plan. We’re executing in opposition to the plan. The plans resulted in rising FRE and rising earnings. Every part appears to be clicking good. What I additionally like is our monetary reporting is obvious, clear, simple to know. We proceed to clearly take a look at alternative ways to enhance FRE and make the most of totally different alternatives, however there’s nothing in our plans to do a serious comp restructure as you are suggesting. And we might solely be interested by one which’s actually substantive in nature versus simply altering geography on the P&L. So when and if there’s ever one thing for us to do, we’ll clearly report that to you. However at the moment, the whole lot Kew and I are saying is it is type of working pursuant to our present methods.

Peter John Kaloostian — Morgan Stanley — Analyst

Thanks for taking my query.

Operator

[Operator Instructions] And our subsequent query comes from the road of Rufus Hone from Financial institution of Montreal.

Rufus Hone — BMO Capital Markets — Analyst

Nice, good morning. Thanks for taking my query. I hoped you could possibly contact on asset origination and the alternatives you see in personal credit score. I do know you have already got some established origination channels, however we’re seeing a few of your friends actually double down on this and begin to purchase platforms and provoke asset sourcing partnerships. Ought to we count on to see extra of this from Carlyle? And would you go down the acquisition or the partnership route?

Curtis L. Buser — Chief Monetary Officer

Hey, thanks for the query. First, the credit score enterprise has been doing rather well. The expansion there was vital. We have doubled AUM over the previous couple of years. The annual fee of progress in AUM has typically been round 20%. In the event you take a look at the fundraising, very constant. We’re coming off of actually a record-setting tempo by way of CLO issuance. The demand there was unbelievable. However we proceed to look actually at type of different areas to proceed to construct on our platform. And a few issues which can be clear: one, taking a platform method by way of how we’re constructing the enterprise; two, very a lot centered at the moment on investment-grade credit score; and three, we’re taking a look at money yield for our buyers.

And customarily been profitable in all these ranges. So simply to remind individuals, our credit score alternatives enterprise goes very nicely, elevating its subsequent fund. It has been deployment nice. The efficiency there was very sturdy. CLO enterprise, we already talked about. Aviation, nice enterprise, simply did a really giant transaction, once more performing exceptionally nicely. Increasing in each infrastructure credit score, actual property credit score, that gives additional alternatives. And let’s not neglect the direct lending enterprise that simply had a document origination right here within the quarter. So once more, platform method to ship the outcomes.

Operator

Our subsequent query comes from the road of Gerry O’Hara from Jefferies.

Gerald Edward O’Hara — Jefferies LLC — Analyst

Nice. Thanks. Possibly only one on type of the trajectory of FRE margin from right here. We clearly heard the type of continued focus to construct workforce infrastructure in addition to clearly some very sturdy, I suppose, forward-looking fee-related earnings coming on-line. Are you able to assist us type of stability the 2? And I’d assume some degree of simply kind of elevated spend as we transfer type of into this post-pandemic world. However how we must always take into consideration the tempo between right here and as Curt, you talked about the forward of schedule because it pertains to the 40% goal? Thanks.

Curtis L. Buser — Chief Monetary Officer

Gerry, thanks. Look, as I stated earlier than, we care rather more about FRE {dollars} than FRE margin. And so we will, at the beginning, chase improve in FRE {dollars}. Margin is a solution to get there, however it’s not the tip all by itself. All of it comes all the way down to {dollars} within the door. In order that’s our primary objective. From a margin perspective, we have been rising very properly, so 34% right here within the quarter, 33% year-to-date. You may see within the World Funding Options enterprise, it is already as much as 37%. So a whole lot of issues are actually coming collectively properly. In all probability my lowest-margin enterprise proper now remains to be in credit score, however that is as a result of we have been investing and constructing that platform.

That ought to be our main piece, simply as we stated at first of the yr. That is going to develop and actually drive a whole lot of FRE margin growth as we go ahead. And so look, I believe we’re on observe to hit the 40% sooner than 2024. And the precise once we hit it, I do not know, however it will be before 2024. And we will have a pleasant progress right here coming in subsequent yr for all the explanations that I’ve already stated, and the enterprise is shaping up actually properly. We’re centered clearly on price, however extra importantly, on rising high line income.

Gerald Edward O’Hara — Jefferies LLC — Analyst

That is it for me. Thanks for taking my query.

Operator

This does conclude the question-and-answer session of at present’s program. I would like handy this system again to Daniel Harris for any additional remarks.

Daniel F. Harris — Managing Director and Head of Public Investor Relations

Thanks very a lot to your time at present. We all know it is a busy interval. We look ahead to talking with you on subsequent quarter’s name, and we’ll be at a number of conferences in the course of the fourth quarter, so we look ahead to that as nicely. Have an excellent day.

Operator

[Operator Closing Remarks]

Period: 43 minutes

Name members:

Daniel F. Harris — Managing Director and Head of Public Investor Relations

Kewsong Lee — Chief Government Officer and Director

Curtis L. Buser — Chief Monetary Officer

Glenn Paul Schorr — Evercore ISI Institutional Equities — Analyst

William Raymond Katz — Citigroup Inc. — Analyst

Alexander Blostein — Goldman Sachs Group, Inc. — Analyst

Christoph M. Kotowski — Oppenheimer & Co. Inc. — Analyst

Peter John Kaloostian — Morgan Stanley — Analyst

Rufus Hone — BMO Capital Markets — Analyst

Gerald Edward O’Hara — Jefferies LLC — Analyst

Extra CG evaluation

All earnings name transcripts