Executive Summary / Key Takeaways

• Carlyle Group is executing a strategic transformation, shifting towards a more diversified, capital-light, and organically driven growth model, with significant momentum in Global Credit, Carlyle AlpInvest, and Global Wealth.
• The firm delivered record financial performance in Q3 2025, with Fee Related Earnings (FRE) of $312 million (up 12% year-over-year) and year-to-date FRE of $946 million (up 16%), alongside record Assets Under Management (AUM) of $474 billion.
• Strategic initiatives in Global Credit, particularly insurance solutions and asset-backed finance, and Carlyle AlpInvest's secondaries and co-investment platforms, are driving substantial AUM inflows and FRE growth, now contributing 55% of firm-wide FRE.
• Carlyle is confident in exceeding its 2025 financial targets, projecting full-year FRE growth of approximately 10% and inflows of $50 billion, underpinned by robust pipelines in deployment and realizations, and an expanding global wealth channel.
• While macroeconomic and geopolitical uncertainties persist, Carlyle's diversified platform, strong balance sheet, and focus on high-quality capital markets fees position it for continued long-term growth and shareholder value creation.

The Evolution of a Global Investment Powerhouse

The Carlyle Group Inc. ($CG), established in 1987, has evolved into a leading global investment firm, deploying private capital across a diverse range of strategies. Its transformation from a Delaware limited partnership to a Delaware Corporation on January 1, 2020, marked a pivotal moment, streamlining its operational framework for future growth. Carlyle's core business revolves around advising investment funds across Global Private Equity, Global Credit, and Carlyle AlpInvest, while also developing key growth areas like Global Wealth and Capital Markets. This strategic pivot emphasizes organic expansion, a capital-light model, and leveraging its global brand and deep sector expertise to meet the shifting demands of private capital.

In the competitive landscape of alternative asset management, Carlyle operates alongside industry giants such as Blackstone Inc. (BX), KKR & Co. Inc. (KKR), Apollo Global Management Inc. (APO), and Ares Management Corporation (ARES). Carlyle's global presence, particularly its long-standing commitment and deep networks in regions like Asia and Latin America, provides a qualitative edge in deal sourcing and client engagement, differentiating it from competitors with more concentrated geographic or sector focuses. For instance, while Blackstone often leads in overall scale and brand prominence, Carlyle's targeted approach to middle-market investments and emerging regions allows it to carve out significant opportunities. Similarly, against KKR's emphasis on operational improvements, Carlyle's diverse platform offers a broader suite of solutions, from secondaries to direct lending, providing stability across various market cycles.

Foundational Strengths and Technological Edge

Carlyle's competitive moat is built upon its extensive global network, deep sector-specific expertise, and an increasingly sophisticated platform that integrates data-driven insights and innovative product structuring. While not a technology company in the traditional sense, Carlyle's "technological differentiation" manifests in its advanced analytical capabilities and strategic deployment of digital tools to enhance investment processes and client solutions.

The firm's investment in technology extends to its portfolio companies, where "continued investment in technology and AI infrastructure" is a key focus. For example, Acentra Health, a Carlyle-backed entity, is actively engaged in "data modernization efforts" and leveraging "predictive analysis" to improve healthcare outcomes. A notable initiative, the Safe AI in Medicaid Alliance (SAMA), aims to develop "safe and responsible Medicaid-focused frameworks for artificial intelligence (AI) adoption and use." These efforts within portfolio companies contribute to their operational efficiency and value creation, ultimately benefiting Carlyle's funds.

For Carlyle itself, the benefits of its platform capabilities are tangible and quantifiable. Its strategic origination partnerships in asset-backed finance (ABF) enhance deal flow, leading to "enhanced origination capabilities" and "efficient capital allocation." The development of innovative products like GP-led collateralized fund obligations (CLOs) and evergreen wealth solutions demonstrates its ability to structure complex offerings that meet evolving investor needs, providing "speed of deployment" and "diversification benefits." This strategic intent behind leveraging technology and advanced analytics contributes directly to Carlyle's competitive positioning, enabling superior deal sourcing, risk management, and the delivery of bespoke client solutions, which in turn drive AUM growth, fee revenues, and overall financial performance.

Strategic Pillars and Performance Drivers

Carlyle's recent performance underscores the success of its diversified growth strategy, with significant contributions from its Global Credit and Carlyle AlpInvest segments. These segments now collectively account for approximately 55% of firm-wide Fee Related Earnings (FRE), a substantial increase from about 25% five years ago.

Global Credit: Scaling Solutions and Robust Inflows

The Global Credit segment has emerged as a powerhouse, with Assets Under Management (AUM) reaching $208 billion as of September 30, 2025, representing 45% of firm-wide assets and a 33% compound annual growth rate (CAGR) over the past five years. This segment's FRE now constitutes nearly one-third of Carlyle's total. In Q3 2025, Global Credit attracted nearly $10 billion in inflows, contributing to $31 billion over the last twelve months. This growth is broad-based, with fee revenues up 18% year-to-date and FRE up 28% year-to-date.

A key driver is the $87 billion insurance solutions platform, anchored by the strategic partnership with Fortitude Re. This platform closed a $4 billion reinsurance agreement with Unum (UNM) in Q3 2025, its fourth such transaction this year, and launched a reinsurance sidecar for growth in Asia. These initiatives are projected to generate over $20 billion in new AUM in the intermediate term. The nearly $50 billion global CLO platform also saw over $3 billion in inflows in Q3 2025, maintaining strong credit quality with default rates significantly below the industry average. Carlyle's $13 billion direct lending platform has grown at a 20% CAGR over the past five years, exhibiting healthy credit quality with realized losses averaging just 10 basis points per year over the past decade. The $10 billion asset-backed finance business raised $2 billion in Q3 2025, highlighting strong demand for private investment-grade assets.

Carlyle AlpInvest: The Solutions Engine

Carlyle AlpInvest has delivered exceptional growth, with FRE more than 80% year-to-date and AUM increasing over 20% year-to-date to $102 billion as of September 30, 2025. This segment's FRE now represents 23% of Carlyle's total, tripling its contribution in just two years. In Q3 2025, AlpInvest recorded $6.3 billion in inflows, bringing the year-to-date total to over $15 billion.

The segment's latest secondaries fund closed at a record $20 billion, its largest ever, demonstrating leadership in a rapidly expanding market. Carlyle also innovated with a $1.25 billion publicly rated, GP-led collateralized fund obligation and a $550 million credit secondaries continuation vehicle. Management anticipates consistent, rather than "step-function," growth for AlpInvest, driven by its diversified offerings including secondaries, co-investments, primary fund investments, and portfolio finance solutions. The secondary market continues to grow at "very elevated levels," with Carlyle positioned as a "hyperscaler" offering a comprehensive suite of liquidity tools.

Global Wealth and Capital Markets: Expanding Reach

Carlyle's Global Wealth channel has seen remarkable acceleration, with evergreen inflows now running at $3 billion per quarter, a tenfold increase since the new management team took the helm a few years ago. Total evergreen capital AUM now exceeds $32 billion. Key to this growth is the strategy of three flagship funds: CTAC (credit), Carlyle AlpInvest Solutions (secondaries), and CPEP (private equity, launching in late 2025/early 2026). The partnership with UBS (UBS), making Carlyle the exclusive private equity secondary solution for UBS's international wealth clients, has already surpassed $1 billion in assets for the Carlyle AlpInvest CAP solution.

The Capital Markets business, a strategic initiative launched two years ago, has also demonstrated significant momentum. It generated almost $240 million in revenues over the last 12 months, tripling its performance over the past two years. This revenue stream is characterized as "very high quality" due to its capital-light nature, focusing solely on Carlyle's internal activities without taking balance sheet risk. Management sees "further upside" as M&A and IPO activity accelerates.

Global Private Equity: Performance and Realizations

While 2025 has been a "quiet year for private equity and fundraising," the Global Private Equity segment, with $163 billion in AUM, has focused on driving value and returning capital. Realization activities in global private equity have returned nearly $20 billion to investors over the last 12 months, 30% higher than the prior period and 150% of the industry average. Notable exits include the IPO of Hexaware Technologies in India (the largest sponsor-backed IPO in India in over a decade) and a secondary sale of StandardAero shares. The firm also announced a €7.7 billion carve-out of BASF's coatings business and the proposed IPO of Medline.

The U.S. buyout platform, particularly CP VII and CP VIII, has shown strong performance, appreciating 17% and 20% respectively over the last 12 months. CP VIII, a second-quartile fund, already exhibits a "healthy level of DPI" despite being 65%-70% invested. The tenth vintage U.S. real estate fund successfully closed at $9 billion, 15% larger than its predecessor, a significant achievement in a challenging fundraising environment.

Financial Performance and Liquidity

Carlyle's financial performance in 2025 reflects its strategic momentum. For the third quarter of 2025, the firm reported Fee Related Earnings (FRE) of $312 million, a 12% increase year-over-year. Year-to-date FRE reached $946 million, up 16% from the prior year, with FRE margins remaining strong at 48% for both the quarter and year-to-date, surpassing last year's record of 46%. Total fee revenue for Q3 2025 increased 11%, and year-to-date growth of 13% represents the fastest pace in three years. Distributable Earnings (DE) for Q3 2025 were $368 million, or $0.96 per share, bringing year-to-date DE to $1.3 billion, up 10% from last year.

Total AUM reached a record $474 billion by September 30, 2025, a 7% increase year-to-date, driven by organic inflows of $17 billion in Q3 and nearly $60 billion over the past 12 months. This growth is a direct reflection of successful fundraising and deployment across credit, secondaries, and global wealth strategies. Capital markets and transaction fees were $32 million in Q3 2025, up almost 20% year-over-year, and have more than doubled over the past 12 months, contributing to the firm's diversified revenue streams.

Carlyle maintains a robust liquidity position. As of September 30, 2025, cash, cash equivalents, and corporate treasury investments totaled approximately $2.10 billion, after accounting for specific allocations. This provides ample resources for primary liquidity needs, including funding growth initiatives, operating expenses, and shareholder distributions. The firm's balance sheet is further strengthened by its $1 billion senior revolving credit facility, which had no outstanding amounts as of September 30, 2025. In Q3 2025, Carlyle strategically issued $800 million of 5.05% senior notes due 2035, extending the duration of its liabilities and leveraging its strong credit rating to provide additional capital flexibility for future growth. The firm also repurchased over $200 million of stock in the quarter, demonstrating its conviction in the attractiveness of Carlyle shares.

Outlook and Risks

Carlyle is confident in exceeding its previously updated 2025 financial targets, now projecting full-year FRE growth of approximately 10% (up from an earlier 6% outlook) and full-year inflows of $50 billion (up from $40 billion). This optimistic outlook is supported by strong momentum across all segments, robust client engagement, and a healthy pipeline of deployment and realization opportunities. Management anticipates continued growth in capital markets revenue, driven by increased activity and the firm's expanding capabilities. The Global Wealth channel is expected to sustain its rapid growth, further diversifying the firm's capital base.

Despite this positive trajectory, Carlyle acknowledges a "somewhat complex, but quite resilient environment." Key risks include:

• Macroeconomic and Geopolitical Uncertainty: Ongoing headlines related to policy shifts and geopolitics, particularly the dialogue with China, could impact global economic stability and market sentiment.
• Market Volatility: Fluctuations in public markets, as seen with certain public investments in CP VII and CAP V, can affect fund performance and performance allocations.
• Credit Market Stress: While Carlyle's portfolio data does not signal broad deterioration, recent bankruptcies in syndicated loan and private credit markets highlight potential risks, especially if the Federal Reserve misinterprets labor-supply shortfalls and cuts rates too aggressively, potentially triggering wage-price pressures in 2026.
• Giveback Obligations: Realized carried interest may be subject to repayment if fund investment values decline below certain hurdles, though current and former senior Carlyle professionals are responsible for a significant portion of this.
• Litigation and Regulatory Scrutiny: The firm is routinely subject to examinations and legal proceedings, which, while not currently expected to materially affect financial statements beyond accrued amounts, could have a material impact in any particular period due to their inherent unpredictability.
• Fundraising and Deployment Pace: A slowdown in capital deployment could affect the ability to raise new funds and impact management fees.

Carlyle's competitive positioning is strong, particularly in its diversified offerings and global reach. However, it faces challenges from larger competitors like Blackstone in overall scale and from specialized firms like Apollo in credit-focused segments. Carlyle's strategic response involves continuous organic growth, disciplined capital allocation, and leveraging its platform's capabilities to drive innovation in product development and client solutions.

Conclusion

The Carlyle Group Inc. is in the midst of a compelling strategic transformation, successfully pivoting towards a more diversified and organically driven growth model. Its robust performance in Q3 2025, marked by record FRE, AUM, and strong inflows, is a testament to the effective execution of its strategy. By strategically investing in high-growth areas like Global Credit, Carlyle AlpInvest, and Global Wealth, and by optimizing its Global Private Equity franchise through active realizations, Carlyle is building a resilient and expanding earnings base. The firm's commitment to a capital-light model, coupled with its global brand and innovative platform capabilities, positions it favorably to capitalize on the enduring demand for private capital. While the macroeconomic and geopolitical landscape presents inherent uncertainties, Carlyle's disciplined approach to capital allocation, strong liquidity, and proactive strategic initiatives underscore a clear path for continued value creation for its discerning investment audience.