Good day. Thank you for standing by. Welcome to The Carlyle Group fourth quarter 2022 earnings conference call. At this time, all participants are on a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. I would now like to hand the conference over to your speaker today, Daniel Harris, Head of Investor Relations. Please go ahead.
Thank you, Kevin. Good morning. Welcome to Carlyle's fourth quarter 2022 earnings call. With me on the call this morning is our Interim Chief Executive Officer and Co-Founder, Bill Conway, and our Chief Financial Officer, Curt Buser. This call is being webcast and the 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 reconciliation of these measures to GAAP in our earnings release to the extent reasonably available. Any forward-looking statements made today do not guarantee future performance and undue reliance should not be placed on them.
These statements are based on current management expectations and involve inherent risks and uncertainties, 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. Early this morning, we issued a press release and a detailed earnings presentation, which is also available on our investor relations website. I'm gonna begin with a quick discussion of our results and then hand the call over to Bill. For the fourth quarter, we generated $202 million in fee-related earnings and $433 million in distributable earnings, or $1.01 per share.
Fee-related earnings for the full year 2022 of $834 million increased 40% compared to 2021, and FRE margin expanded to 37% from 33% last year. Strong organic growth and several strategic transactions combined to deliver another year of substantial growth. We generated $1.9 billion in distributable earnings in 2022 or $4.34 per share, with a good balance of earnings from FRE, net realized performance revenue, and realized investment income. We enter 2023 in a strong capital position. We have $1.4 billion in cash, $2.4 billion in firm investments, and $4 billion of net accrued carry on our balance sheet, in total over $20 per share.
We have nothing drawn against our $1 billion revolver. Our debt ratings from both S&P and Fitch improved to A- ratings. The strength of our balance sheet gives us confidence that we can continue to pursue growth strategies, both organic and inorganic, to help continue to deliver additional FRE growth. We delivered a quarterly dividend of $0.325 per common share. The combination of our balance sheet strength and sustainable growth in FRE allowed our board of directors to approve another increase in our fixed dividend to $1.40 per share per year, an increase of 8% year-over-year and up 40% over the past two years. This higher dividend will begin with Q1. With that, let me turn the call over to our Interim Chief Executive Officer and Co-Founder, Bill Conway.
Thank you, Dan. Good morning, everyone, and thank you for joining us today. I am pleased to be on the call to discuss Carlyle's fourth quarter and full year results. As you've heard, Carlyle delivered strong results to our stakeholders despite the challenging market environment. The firm is operating well, and I have tremendous confidence in our ability to capture investment opportunities and to continue to grow our platform in 2023. I want to talk about three topics this morning: the outcome of our CEO selection, the strong financial performance of Carlyle in 2022, and some general thoughts on our outlook. First, we are incredibly pleased that Harvey Schwartz will join Carlyle as the new CEO on February 15th.
As you all know, this was an incredibly important decision for Carlyle, and the search committee of the board, on which I serve, drove a robust and exhaustive search for a new CEO. Following a thorough and competitive process, Harvey was unanimously chosen by the board as the right leader to move Carlyle forward in its next phase of growth. Harvey is a widely respected business builder with significant leadership experience in a high performing, highly competitive global financial institution. He's a seasoned operator with a proven record of leading and developing a wide range of businesses and a demonstrated ability to invest in and develop the talent and organizational structure to manage and support these businesses. As we look to the future, there's tremendous opportunity to grow and to continue to transform Carlyle and deliver sustainable results over the long term.
Harvey brings the experience and skill set to fully capture this opportunity. As CEO, he will set and execute a strategy that advances and accelerates the diversification plan the firm has successfully pursued, as well as identify new investment opportunities to further scale the business, drive performance, and deliver growth. I am confident in Harvey's leadership and look forward to introducing him to you in the very near future. Moving on, I'd like to discuss our 2022 results. Curt will dive into our results in more detail, but I wanted to touch on a few notable points.
As Dan mentioned, we generated record fee-related earnings of $838.4 million in 2022, an increase of 40% over 2021, which demonstrates that our strategic focus to grow FRE and diversify our earnings mix is paying off. We earned $1.9 billion in distributable earnings despite a volatile exit environment. We delivered investment returns that were attractive across our portfolio. Our aggregate carry fund portfolio appreciated 11% in the year, while the public markets were down about 20%. As I said last quarter, portfolio construction and risk management matter, and we believe that this is a key differentiator that positions our investment teams to deliver superior relative performance across market cycles.
Turning to our outlook, as we enter 2023, we are confident in the strong foundation of the firm and believe that we are well-positioned to capture new growth opportunities. Harvey will focus on building off this strong foundation. At its core, our business involves raising money and investing money, and then making the money that we've invested worth more. Let me begin with some thoughts on fundraising. No doubt the backdrop for raising new capital remains challenging, with headwinds more pronounced in certain areas than others. However, today's environment is different from what we faced entering 2022. Early last year, an unexpected and sharp change in market sentiment had investors on their back foot for most of the year. With rapidly deteriorating public equity and debt prices, the denominator effect greatly reduced LP interest and ability to make new commitments.
Over the past few months, at least until last week, we've seen a gradual reduction in market volatility. Investors still believe that they have a better handle on the magnitude of further interest rate changes. In addition, Carlyle's long-standing relationships with the largest and most sophisticated investors around the globe is a benefit. We continue to see strong demand for many of our investment strategies across our three global segments. Our platform has continued to diversify. It's important to note that roughly two-thirds of our fundraising last year came from areas such as global credit, global investment solutions, natural resources, and real estate. While corporate private equity may continue to face headwinds, we see significant capital raising opportunities across our platform.
We will have more strategies raising capital in 2023 than we did in 2022, including our next vintage flagship funds in credit opportunities, secondaries, co-investments, and buyout funds across the globe. We anticipate that our overall dollar volume of fundraising in 2023 will be higher than the $30 billion we raised in 2022. Over the past few months, I've been around the world speaking with our teams and investors and feel confident in the power of our platform. Our investors value our partnership, our global reach, and our ability to construct diverse portfolios that perform across market cycles. Now that Harvey is here, it has also taken away some uncertainty about our path forward as a firm, and we think that will also have a positive impact on fundraising.
Regarding capital development, today's market conditions create new opportunities to invest capital across all of our global businesses. Recently, there's been a wider than average spread in pricing expectations between buyers and sellers, which has impacted capital development. The spread is across most asset classes, but has been more pronounced in private equity than in other strategies. We are starting to see evidence of this spread narrowing. As debt and equity capital markets continue to reopen, the pace of deal activity is poised to accelerate. We deployed a record $35 billion in capital in 2022 with a good balance across equity, credit, and solution strategies. We are well positioned for further investment with $72 billion in dry powder to capitalize on an improving environment.
We expect to find ample opportunities to make new investments in 2023 and beyond on behalf of our fund investors. In addition, the improving deal environment presents an opportunity for our global credit business to provide unique capital solutions to the marketplace. In 2022, we underwrote $3.9 billion of new loan activity in our direct lending strategy, our CLO team issued nine new CLOs while also trading $30 billion across their portfolios to better position the CLOs for the expected economic environment. As fund investors' need for liquidity persists, we are well-positioned to capitalize on this need through our secondaries and co-investments business. Overall, 2022 was a solid year across most financial metrics for Carlyle, and we enter 2023 with strength and momentum.
With Harvey as our new CEO, alongside our strong leadership team, Carlyle is well-positioned, and we're confident that he will build on this momentum to bolster the firm's position and create value for all our investors and shareholders. With that, let me hand the call over to our Chief Financial Officer, Curt Buser, to discuss our financial results in more detail.
Thanks, Bill. Good morning, everyone. I wanna start by reiterating many things Bill mentioned that emphasize the strong position Carlyle finds itself in as we begin this year. We believe our investment portfolios are in good shape and are well-positioned to weather economic volatility. We expect to deliver long-term attractive performance for all of our stakeholders. We produced a robust $4.34 per share in distributable earnings in 2022, displaying the significant cash earnings power of our firm. We've now earned over $9 in DE per share in just the past two years. We remained focused on growing fee-related earnings. It grew by 40% in 2022. Over the past five years, our FRE CAGR has been a robust 34%.
Our overall earnings mix continues to diversify as we have grown our credit, insurance, capital markets, and solutions capabilities. Our strong growth in fee-related earnings is not driven by a single fund or strategy. Rather, our performance owes to driving broad-based top-line fee growth across our global platform. Top-line fee revenue growth was 25% in 2022, and was driven by the following. First, raising capital for and growing our traditional high-performing investment strategies across each of our three global segments. Second, organically building out new fee-generating businesses like opportunistic credit, insurance, capital markets, and infrastructure credit, to name just a few, each of which added significantly to our growing fee revenue pool throughout the year.
Third, we've been actively adding new inorganic streams of earnings, such as our transactions to further scale our CLO business with CBAM and our advisory agreement with Fortitude. These efforts have scaled our platform and helped drop more of our top line revenues to the bottom line as we expanded our full year FRE margin to 37% in 2022, an increase of nearly 400 basis points compared to 2021. FRE margin has more than doubled over the past five years. We have done this while concurrently investing in new product development and enhanced distribution capabilities, notably across the private wealth channel. We expect to continue to grow FRE in 2023. FRE in the first quarter will likely be similar to Q4 of 2022, before increasing in the second half of the year.
In addition, we remain highly confident in our ability to grow FRE well into the double-digit range over the mid to longer term, in line or better than the market trends across the private capital industry. Consistent growth in fee-related earnings is supported by the attractive investment returns we produce for our fund investors. Our investment teams again delivered appreciation that outperformed public benchmarks, even with increasingly higher discount and cap rate assumptions in our valuation models and elevated concerns about a global recession. While only 6% of our carry fund portfolio was publicly traded at year-end, public market comparables are an important input to our valuation methodology and generally were a downward driver of valuations across our private assets during the year.
Of course, the most important valuation driver of any investment is underlying asset level performance, which in general continued to reflect growth in revenues and earnings, though this growth generally slowed in the second half of 2022. Our strong performance also owes to our focus on deploying capital into sectors where we have deep industry expertise and experience. Our real estate funds appreciated 16% during 2022. Our infrastructure and natural resource funds appreciated a very strong 48%, and corporate private equity funds were up 6%. We realized $34 billion in proceeds for the year, which produced another year with $1 billion in net realized performance revenue. About what I previously indicated would be a good target in most years. Looking forward, net accrued carry increased 2% year-over-year to $4 billion.
A solid portfolio appreciation more than offset strong carry realizations. We ended the year with $138 billion in fair value in our carry funds, up more than 10% compared to year-end 2021. In general, we continue to expect to generate, on average, $1 billion in annual net realized carry. Depending on the year, realized performance income could be elevated, as it was in 2021, when market factors were favorable, or lower in years where uncertainty diminishes capital markets activity. Industry-wide activity rates slowed considerably in the past few months as buyers and sellers continue to search for a valuation middle ground, and funding markets, while available, are less amenable than they were just a year ago.
For Carlyle specifically, new investment and realization activity has also been slower. We expect a muted start to 2023 for both deployment and realizations. Thus, transaction revenue and realized performance income will be lower over the next quarter or two. If, however, activity rates across the industry improve over the next few months, our expectations for a higher performance and transaction revenues will also increase. Let me now turn to some quick thoughts on each of the business segments. Global private equity had another strong year, with fee-related earnings up 34%. Strong appreciation across real estate, infrastructure, and natural resources helped net accrued carry increase to $3.5 billion after more than $900 million of net carry realizations.
$20 billion of invested capital was generally similar to $23 billion of realized proceeds, which positions global private equity to continue to deliver attractive levels of distributable earnings in future periods. It benefited from both organic growth activity as well as the positive impact from strategic transactions.
Top line fee revenues grew 46% in 2022, resulted in fee-related earnings more than doubling to $225 million and fee-related earnings margins increasing by nearly 1,000 basis points to 37%. Strong investment performance across various strategies produced $70 million of net realized performance revenue. Our credit interval fund delivered attractive performance with a 10% dividend yield, while continued net inflows grew managed assets to more than $2 billion. We raised $15 billion in new capital across 11 strategies in global credit in 2022, and we expect to have an active year fundraising for additional strategies in 2023, which should position global credit for further growth. In addition, we remain focused on helping Fortitude evaluate new growth opportunities, which would help us benefit from incremental advisory revenues.
In global investment solutions, we are well positioned to see growth in this segment as we begin fundraising for our flagship products, including next vintages in our co-investment and secondary strategies. Fee-related earnings of $69 million in 2022 was lower than 2021, we expect to see growth later in 2023 as these strategies attract new capital. In addition, with $374 million in net accrued carry and very strong fund performance-related revenues are well positioned to increase over time. In sum, we delivered strong performance for our stakeholders in 2022 and are well positioned for what will likely be a more attractive investment environment in 2023. We see tremendous opportunity to deploy capital into what we think will be a great investment for our portfolio and fund investors. Let me turn the call over to the operator so we can take your questions.
Ladies and gentlemen, if you have a question or a comment at this time, please press star one one on your telephone. If your question has been answered and you wish to remove yourself from the queue please press star one one again. We ask that you limit yourself to one question and one follow-up. One moment for our first question. Our first question comes from Glenn Schorr with Evercore ISI. Your line is open.
Hi. Thank you. Appreciate it. Maybe for Bill first. I think a lot of investors have been getting on board the direction of travel for Carlyle for the last couple of years, FRE growth, margin expansion, diversification. We had a pause for six or seven months. We found Harvey. Maybe talk a little bit more about why Harvey, most importantly, what's he here to do relative to the strategy that all these investors are on board? I wanna know, like, is that strategy important to you and the cofounders? The process we went through is what it is. Just curious if you could talk to that. Thanks.
Sure. Thank you for the question, Glenn. You know, first of all, I am very excited that Harvey is going to join us. He was our first choice, and he is. I think it should be pretty obvious why. We were looking for somebody who had a, you know, a really proven track record. We were looking for somebody who had experience building businesses. We were looking for somebody who had a record of, managing and recruiting and training and developing talent and working in a collaborative environment. We were looking for somebody who could relate to people like you and Wall Street and tell our story. A wide range of skills, and frankly, there aren't a lot of people who have all those skills. Harvey, I think we found that person.
He is really fantastic. Yesterday, he and I were walking around our New York office. We went on all the floors. We were talking to people, he was happy to see them, and they were happy to see him. It was really not so much they wanted to get rid of me, but rather they were excited to see him there. We obviously have a lot of people who used to work for Goldman, and they were happy to see him, and people who just had heard about him and his track record and his skill set. I think, you know, why Harvey and who he is and what his track record is, that was, you know, pretty clear to me that we couldn't get anybody any better than Harvey. He's fantastic.
Now, what's he here to do? I think in some ways, the path that we have is, is set. We want to First of all, we want to increase the stock price. You know, even though we've got a great investment track record, that doesn't show up in our stock price. You know, how is he gonna do that? Well, we have to grow our business, particularly the fee-related earnings, but other parts of the business as well, that assets and the like. He's got a great set of experiences.
Remember, he was at Goldman during the time of a financial crisis, you know, talking about having to deal with situations that were risky and yet had great opportunity. I don't see dramatic changes in the basic strategy, but it'll be up to Harvey. You know, he's going to be the CEO of the company, and I'm gonna do everything I can to help him be successful, including staying out of his way, if that's the right part of the solution. I can't tell you how happy I am that he's here.
Well, long track record with him, so I totally agree with that. Maybe just one numbers question. I'm interested in your comments about the improving bid-ask dynamic, you have $11 or so in net accrued performance revenue, which is a lot relative to your stock price, like you said. You realized $1 billion in performance revenue, but you picked up another $1 billion basically on the back of infrastructure and natural resources. Could you expand a little bit more on what you talked about the improving bid-ask dynamic, a bid-ask dynamic? Is that like a near-term-ish thing, or is that a hopefully second half thing? Just curious on what you think it takes to get the wheels moving again.
You know, that is, that's the real question, isn't it? Of course, what we're talking about there is that sellers think their businesses were worth what they were worth a year or two ago. Buyers say, "Well, I don't wanna pay those prices anymore." So there's been a gap. I've mentioned in my remarks that it's been both in the prices of equities, where you see it kind of on the value of the companies that you own, but it also applies to credit. For example, in there was a deal recently we looked at where the credit spread or all-in price of the credit a year ago might have been six or 6.5%, and now it's double digits. There are still certainly some disparities in valuation.
It is getting better, Glenn, and I'd say it's getting better slowly. It's not rapidly. This is not gonna be something that I think somebody's gonna, you know, ring the buzzer and we're gonna know that it's where it should be. You know, private equity has the advantage, and private debt too as well, of being, you know, able to evolve and able to function in lots of different kinds of environments and to adjust to those environments. I see that in the types of deals that we do now. We're not doing deals that are giant deals that require, you know, billions, $10 billion of equity and $10 billion of credit. Those deals would be almost impossible to do today. The market is gradually healing. Buyers and sellers are gradually coming together, and I think it's on both sides.
I think buyers are driving the prices down, and I think, buyers, what they're willing to pay, and the sellers are saying, "Well, maybe, you know, we're gonna have to just be able to settle for a lower price than we thought." I think that's across the board. It's not gonna be, you know, just in private equity. It's not gonna be just in America. It's everywhere.
Thank you for all that.
More in the second half probably than the first.
Yep, I hear it.
One moment before our next question. Our next question comes from Bill Katz with Credit Suisse. Your line is open.
Okay, thank you very much, and congrats on adding Mr. Schwartz. A question for you guys. You mentioned that you think that asset gathering can be better in 2023 than in 2022. I was wondering if you could unpack that a little bit and maybe bifurcate between where you stand on sort of the three flagship corporate private equity portfolios versus the rest of the business with some emphasis on the solutions business. Thank you.
Bill, it's Curt. Hey, thanks for your question. I'll start and then Bill, Matt might add in. I'm really proud of what we did in 2022 from a deployment standpoint. We deployed $35 billion across the portfolio. It was actually our most deployment in any year. You know, between 2022 and 2023, you know, it was noticeably better than what it had been in all prior years. Bill talked about some of the challenges here recently, and, you know, we think that that's gonna pick back up. The diversification across the platform and deployment, you know, I was really proud of because what you saw in 2023 was much more coming out of global credit and other aspects of even private equity outside of corporate private equity. All of that was really good.
The deployment piece was really good. That leads us into a good place from a fundraising perspective and sets us up well for fundraising. you know, 'cause the first and foremost thing I think is kinda how the portfolios are performing and then how you think about fundraising. From a fundraising standpoint, a couple high-level things for you to keep in mind. Our portfolios are performing really well, and this I think, you know, sets us up nicely to go as we seek to raise more capital. Second, you know, as Bill said, we expect to raise more in 2023 than we did in 2022, and we'll have more products in the market to support this.
The third thing from a numbers standpoint I want you to, you know, keep in mind is in 2021, at the beginning of the year, we said we would raise $130+ billion over four years. Two years in, we've raised $80 billion, $50 billion last year, $30 billion this year. We added $65 billion through strategic transactions. That's $145 billion of new fee-earning AUM in just two years. You see that in our fee-related earnings, up 40%, 30%+ CAGR over the last five years, and so that's done really well. We've seen a lot of that growth really in credit and in our solutions business. Now, in the buyout funds, we still have obviously some congestion in that space, but there's a number of reasons to have optimism there.
First, you know, as Bill said, I think there's less uncertainty about the, you know, global markets today than there was a year ago. Second, public markets seem to be improving here in early days of, you know, of the year, but it's still early. You know, third, we're in 2023, so that's a new set of allocations for investors. And last, you know, with the appointment of Harvey Schwartz, we have a lot of reason to be excited, and we hope that that carries forward to our investors on taking away some uncertainty that may linger there in certain situations. Look, you know, I'll reiterate that I think that our buyout funds will be similar in size to their previous, you know, vintages.
I'm confident in that and very excited about kind of our overall growth in the firm and think that this will be a better year from a fundraising perspective than it was in 2022. Again, you know, helping us in our focus on driving fee-related earnings.
Okay, thanks. Just a follow-up, maybe stick with you, Curt. Just sort of triangulating the notion of FRE up in 2023 over 2022, just sort of wondering how you might be able to ring-fence that. Then just given the sort of, you know, yet to be determined incremental strategy with Mr. Schwartz, how should we think about margins? I hear a lot of grow the business, grow the business, grow the business. Can you drive FRE up and FRE margins up if you still need to grow the business? Thank you.
Bill, look, you know, I said we're confident we're gonna grow fee-related earnings in 2023. I think the first quarter will be a little flat, as I said in my remarks, but thereafter, I think things are really set up nicely. This is a challenging environment, and we are continuing to invest. That's why, you know, I think this one might be a little lower rate of total growth than, say, in the past. You know, feeling really good about our ability to grow fee-related earnings. I think with Harvey coming on, you know, his past experience in, you know, helping companies or helping situations improve profitability will be a good addition to the team, will bring new thoughts to this.
Look, you know, I also wanna be careful and give, you know, him the opportunity to put his, you know, imprint on things. I'm gonna be a little cautious in terms of, you know, how much specificity I give in guidance, but we're really well set up to begin 2023.
Thank you.
One moment for our next question. Our next question comes from Alexander Blostein with Goldman Sachs. Your line is open.
Thanks, everybody. Good morning. Thanks for the question. Maybe just to follow up the prior discussion from Bill's question. You know, it sounds like you guys still feel pretty confident about the overall fundraising targets that you laid out a couple years ago, but the mix might be slightly different. Obviously, you highlighted the private equity business is a little bit slower. Can you expand on that a little bit? As you think about the ramp that you're talking about into 2023 from FRE growth, what are some of the key products and strategies that you expect to be kind of the biggest contributors to that ramp?
Hey, Alexander Blostein, it's Curt . Let me start and then Bill can add. Look, credit did about $15 billion this past year. It's gonna have more product in the market than last. Feeling really good about how that continues. Our opportunistic credit fund is out there raising money. Our CLO business will probably start the year a little slower because of, you know, all the reasons we've talked about, but I think, you know, it's always a, you know, a heavy weight in the room. Then in the solutions business, we've got our co-investment products and our secondaries products and, you know, a couple new things that we'll bring to market this year.
Again, more products in that space to think of the solutions business as really being a nice way to kind of really increase from where they were in 2022. In private equity, look, we're gonna have more product in the market in private equity. A number of buyout funds, U.S., Europe, Asia, will, you know, either begin or will be in the market from a fundraising perspective. There's other products in private equity that'll be in the market. That too, I think is well-positioned to do better. I don't know if, Bill, you have anything to add.
Yeah. I think solutions is gonna be a big growing fund and the funds of solutions are gonna be a pretty big growing area this year. I, you know, I also I don't wanna confine Harvey in any way, and I don't want my comments in any way to limit his ability to imagine a different future or a different way that things could be done better. I'm a little hesitant to get too specific on this. I do think that the non corporate private equity funds, the demand is there too. You know, I used that credit example before when I was answering a prior question.
Sometimes when it's a little tougher to raise the equity, raising the credit funds is a little easier because the opportunity is greater, the spreads are wider and more money can be made by the investors in those funds. I don't wanna confine my answer in any way that will limits Harvey and his ability to do a great job.
Got it. All right. We'll stay tuned for, you know, when Harvey's on. my follow-up-
Thank you, Alex. Do you know Harvey? Do you know Harvey?
I've met Harvey, yes.
Okay, good. I'm just, I didn't know whether or not another Goldman Sachs person might weigh in on what a great guy he is.
Well, thanks for that. My quick follow-up for you guys was around Fortitude. That's something you mentioned in your prepared remarks as well. I think, Curt, you highlighted some new growth initiatives within that can kinda help expedite some of the growth as well. Can you expand on that a bit as well?
Sure, Alex. Look, Fortitude's got, you know, $50, $51 billion of AUM. You know, the way we've set up, you know, the services arrangement, you know, we fee off of all of that. In, in addition, they've invested about $9 billion, or I should say, committed about $9 billion, into our fund. All of that has been working, you know, as planned. They also have about three and a half to four and a half billion of excess capital, which positions them nicely to continue to grow. Very active pipeline, working really hard on that.
You know, we've said before that we fully expect for them to be able to double in size because of that, and fully expect that that will occur. When we have more to be able to say on those fronts, you know, we'll be sure to mention that to you. Remain very you know, optimistic about kinda how Fortitude can continue to benefit Carlyle.
Also, I'd also tell you that Fortitude has, we have four or five institutional partners who are in that business and are fellow shareholders with us in Fortitude, and they have been fabulous partners helping us grow that business. For us, it still is a, you know, we got a lot of capital invested, but we have less than we otherwise would thanks to those great partners we have. As Curt said, we do expect to double that business over the next few years, at least.
I gotcha. Great. Thanks very much.
One moment before our next question. Our next question comes from Patrick Davitt with Autonomous Research. Your line is open.
Hey, good morning, everyone.
Good morning.
I want to dig in a little bit more on the CPE fundraising issues. Could you maybe update us, I know it's early in the year, but update us on the tone of the conversations with LPs? Are you starting to see people kind of step back in to PE more broadly? Thoughts on maybe a more specific timeline for when we could see some more chunky closings in those large flagship funds. Maybe through the lens of all that, is it fair to say 4 Q is about as bad as you think it could get in that line?
Patrick, let me start on this. Look, you know, I'm always sensitive about, you know, trying to read into the minds of others or, you know, really try to figure this out in detail. Look, we have great relations with our, you know, LP investors. I think they're pleased with what we're doing. A lot of our portfolio performance has been just, you know, fantastic and well constructed. You know, and, as I already went through a litany of things in terms of what we've done well. $145 billion of capital formation in the past two years. Think that we can continue to do that, you know, in terms of growing and looking, and we'll continue to look at organic things.
Look, I think the tone is good, but it's still difficult in different places. Tone, you gotta be specific really to kind of individual situations and the given fund and the like. There's a lot of reasons to be optimistic as we start 2023. Bill, I don't know if you have anything to add to that.
No more specifics to give at this time, Curt. Sorry.
That's all I have. Thank you.
One moment for our next question. Our next question comes from Kenneth Worthington with JP Morgan. Your line is open.
Hi. Good morning. Thanks for taking the question. Maybe first, private markets investing in energy. As you start to come back to market with more of these funds, how does the better environment in energy mesh with a pension fund community that seems more reluctant to invest further in traditional energy? What does this mean for your ability to grow your energy franchise in what seems like a more constructive energy environment?
Ken, well said. I mean, you know, I do think that we're optimistic on the energy platforms. You know, our partners and colleagues at NGP are excited about their opportunities. They've got a fund in the market now. I don't wanna comment specifically on that, expecting good things out of that. You know, our renewables platform, our power business, our international energy platform, all give us a number of products. They're not all in the market. You're right. Right now, there's a lot of good opportunity, you know, in energy, you know, different LPs based on their constituencies have different perspectives.
The limited experience that we have is that generally we're seeing a nice uptick, you know, from existing investors in existing product, you know, which is different than kind of, you know, going after new or different, but it's a good opportunity at the present time.
I think its returns are pretty uncorrelated with all the other returns available in the market too, that appeals to a certain group of investors as well.
Okay. Do you think the business can grow or does it just sort of stay here as those two trends offset each other?
Look, you know, the needs, you know, are really significant. I think a lot of that has, you know, played out, and so it's too early, Ken, to really call that definitively. Look, I feel a whole heck of a lot better about that whole sector than say, you know, two years ago, where it felt a lot more, you know, difficult. Right now, everything, you know, performance and, you know, the chance for on a lot of those different aspects I think are really, really good.
Thanks. Equity comp fell a bunch during the quarter. What drove it? I assume we see that sort of snapback next year.
Yeah, that's, you know, like a lot of things in this business, looking at any individual quarter is a mistake. You gotta look at it over a longer period of time. The fourth quarter had some unusual things in it. You know, essentially, our fourth quarter is always a little bit light because you've completed a vesting of a big tranche, you know, in the third quarter, you haven't granted anything new. That occurs in February. The fourth quarter is naturally a low quarter, plus we had some performance units for some senior folks that didn't fully vest that had been, you know, accrued prior in the year, the fourth quarter was a little bit light. I do think you're gonna see a significant uptick in our equity-based comp next year, you know, in 2023.
We've made some big grants in February, you know, to a number of our key people and to ensure retention and to make sure to reward people that have performed really well. Also, you know, bringing on Harvey and that'll, you know, also have an increase on our equity-based comp in 2023.
Thank you.
One moment for our next question. Our next question comes from Brian McKenna with JMP Securities. Your line is open.
Great, thanks. Realizations have been pretty resilient despite the tough backdrop. I'm curious, what parts of your portfolios are you most active monetizing today? It might be tough to answer, but what's the base case expectation for realizations in 2023, assuming no material shift in the backdrop? Do you think you can get back to that $1 billion level again?
Brian, it's a great question. you know, I always am like, you know, polishing my crystal ball to fine-tune this as best I can. You know, a year ago, in the fourth quarter of 2021, we earned about $700 million in net realized carry off of a very strong realization period. that was, like, not only impossible to, you know, forecast and predict until kind of as it was happening, it also shows the power of what can occur in a single quarter. we're sitting here today with $4 billion of net accrued carry on the balance sheet. Our underlying portfolio of $138 billion of fair value is up 10% from a year ago.
The portfolio is incredibly well-positioned to continue to drive significant realizations for our LPs and carried interest for us. Exact timing of that, look, it's gonna be second half of the year. Good news is there's some, you know, smaller mid-sized transactions occurring as we speak, that gives me a lot of confidence. You know, the big stuff that will really drive it will be more in the back half of the year. Keep in mind, you know, you actually sign up a transaction, and it takes, often, a couple quarters to actually close the transaction. The level of announced transactions far lower today than, say, a year ago. You know, therefore, you know, it's gonna be the back half of the year.
Helpful. Thanks, Curt. Just with respect to CP VII, gross returns of the fund total 14% or 8% on a net basis. How are you thinking about returns for this fund as it continues to mature over time? If you look back historically, what's the average markup on realized investments relative to the prior unrealized marks?
You know, I would be very careful in terms of, you know, we have funds that are in fundraising, so talking about specifics and forward stuff is complicated on a call like this. Let me give you some high-level thinking. First, you know, our current generation of buyout funds are generally in the same position as their predecessor funds, which all did exceptionally well. Really, you know, I'm optimistic in terms of where this fund and similar vintage funds will continue to perform and do just as I said with respect to carry. I think we're well set up for this. Keep in mind, you know, our portfolio construction, whether it's in private equity or real estate or credit, is very diversified.
You know, we tend to invest in good assets where we have deep industry experience and knowledge, where we understand the macro environment where they're operating in. Most of our value creation comes from driving revenue and driving earnings. It's generally not, you know, "Hey, how do we figure out how to buy low, sell high?" It's generally not kinda, you know, "Boy, we can turn this business around because, you know, we're smarter than everybody else." You know, we bring tools to add to revenue, to add to profitability, and that's what, you know, turns into success.
Great. Thank you.
One moment for our next question. Our next question comes from Rufus Hone with BMO. Your line is open.
Great. Good morning. Thanks for taking the question. I wanted to come back to some of the comments you made around the FRE growth trajectory. I guess could you give us a better sense of when you anticipate getting into the double-digit growth rate you mentioned in the prepared remarks? Do you think you can get to double digits organically, or is that dependent on inorganic growth? Thank you.
Rufus, thanks. Look, you know, we can definitely get double-digit organically, where, you know, the business is growing fast. You know, it's very possible that we'll get there in 2023. I would say it's on the lower side of that. It really depends upon activity level. Transaction fees can be a big help. Transaction fees, you know, essentially, if you look on detail, you know, while 2022 was up over 2021 and was our best year ever on transaction fee revenues, you know, in from, you know, Q2, it kind of peaked and came down in Q3 and came down in Q4, which, you know, put a downward pressure on fee-related earnings. I think they're going to remain light in the first, you know, quarter or so.
Then as they tick back up, that will be a big help. You know, in addition, you know, there's a number of things that we think will also turn on later in the year. Keep in mind, our credit business generally generates fees off of invested capital. As we raise capital in that business and, you know, raised, you know, a lot of money in 2022, as it deploys, we get the benefit of that. So there's a built-in lag between fundraising and fee generation, in particular in that business. Hopefully, that gives you some color.
I would just add, Rufus, that as we said during our remarks, you know, we continue to invest in new product development and distribution, and that's across the platform, we noted that that's in the private wealth channel as well. Those are things that should help us drive organic new growth over time, in addition to, of course, inorganic opportunities that show up and all the things that Curt just mentioned.
Thank you.
One moment for our next question. Our next question comes from Craig Siegenthaler with Bank of America. Your line is open.
Good morning, everyone. We just wanna congratulate you on naming a top-notch CEO.
Thanks, Craig. Thank you.
We want to start with an update on fundraising for the Flagship P Fund, starting with CP8. I think there are a number of large LPs that wanted to wait until 2023 for when their annual deployment allocations were reset before they committed to 8. I just wanna see how this is playing out now that we're a more than a month into 2023.
Craig, it's really too early and really don't like to talk about details on a, on a given fund, but look, remain optimistic in terms of where all of our fundraising can turn out. As we said, I think we're gonna raise more money, you know, this year than we did last year.
Got it. Thanks, Curt. Just as my follow-up, you know, a big question for us is the long-term growth trajectory. I know there's not a ton you can say on this, but when you wrap up your fundraising super cycle with Asia VI and Europe VI this year, and start to exit the cycle, can you talk about the potential for FRE growth to decelerate and help us kinda with this risk really framing into 2024? I think it really comes down to the dynamic of, you know, can you raise enough capital and insurance solutions and credit to offset the net realizations that your privates business will generate?
Craig, I look, I am very optimistic. You know, let's just start with solutions. Solutions, you know, pre 2021 or so was you know, for five years was averaging about $30 million or so in fee-related earnings. Had a very successful, you know, fundraise and growth in that business and stair stepped up, essentially doubled, you know, initially to 80. We're now in the 70s or, you know, it's $69 million in 2022 for fee-related earnings. Does everything that I'm expecting it to do. I see it doubling again. It won't double in 2023, but think 2024, that business can double. We're very bullish on what our credit business can do. We, we think with both products, that we can, you know, really drive, you know, hopefully another doubling of that business. Won't be again in 2023.
It's gonna take us some time, you know, but, you know, really kind of think that we can kind of make some real progress there. That's off the back of continuing to build out our capital markets business, which by the way, I have zero exposure on my balance sheet to, in terms of hung deals or bad things. Really, really proud of our team in capital markets in terms of how they've operated and operating in a very smart way. You know, we talked about Fortitude and what it can do, and look, you know, just the strength across the rest of the structured credit, as well as, you know, a number of new products. Don't forget our opportunistic credit business, which is very bullish and is going strong. There's a lot of great things in credit.
In private equity, look, you know, still remain, you know, interested in kind of what we can do outside of traditional buyout, which, look, I actually think our buyout business is amongst one of the best. You know, with a, you know, little bit of, you know, good news, you know, in some places, we'll be right back to kind of doing what it, what it's always done. You know, and think that we're well set up for real progress there. You know, you just think, you know, real estate, you know, has just a phenomenal track record. It can add to the picture, and see much further growth in real estate.
You know, it's too early to really call out kind of what can happen in energy. I think in infrastructure, you got a nice upside, you know, lift kind of there. It'll take some time, but, you know, it's a nice upside lift. I think across the platform, lots of great things and looking forward to what we can collectively do as a team going forward.
Craig, I think as you referenced the term super cycle, as we've continued to pursue this diversification strategy we've been on for quite some time, that term has less and less meaning for us. Yes, we raise closed-end funds, but if you look at the number of significantly large funds across our platform in every different business, we're gonna raise significant amounts of capital in every year. Then you add on all the things that Curt mentioned outside of what we had several years ago, whether that's Fortitude or opportunistic credit or open-ended products. We see opportunities to raise a lot of capital, which gives us conviction and confidence that we're gonna be able to grow FRE, you know, in a very substantial way over time.
Just to reiterate what we said during our prepared remarks, we've grown FRE at 34% CAGR over the past five years, and that's not an accident. It's because of this process. As we look forward, you know, we're very hopeful, and we're have a lot of confidence that we're gonna be able to deliver great results too.
Thank you, Dan, Curt. Doubles are great.
One moment for our next question. Our next question comes from Michael Cyprys with Morgan Stanley. Your line is open.
Hey, good morning. Thanks for taking the question. Maybe just circling back to some of the fundraising commentary, just as you guys are out on the road meeting with LPs, I was hoping you might be able to comment on pricing trends. To what extent have fees and pricing come up in your discussions with LPs? You know, how are overall economics evolving on the newer slate of funds relative to the predecessor funds when you look across management fees, discounts for size, recycling provisions, step downs, reimbursements for expenses, all of those sort of pieces? What sort of changes, if any, are you seeing in the marketplace?
Michael, it's Curt. I don't think that we're seeing anything significant one way or the other as we are, you know, on the road talking to people. It's the, you know, the stuff that's was always kind of the case still remains the case, which is access to co-investment and the like. That's really where more of the discussions really go, as we're talking to LPs and fundraising.
Thanks. Maybe just to follow up to that, maybe more on the portfolio company side, just around performance, revenue, EBITDA growth trends. Maybe you can just give a little bit of commentary there. What are you seeing, margin trends, inflationary pressures, tight labor conditions? How's the portfolio adapting to the sort of backdrop? If you're able to quantify any of that'd be helpful too. Thank you.
The portfolio grew really nicely first half of the year in particular. The rate of growth decreased second half of the year, but was still growing. You know, over 2022, EBITDA was growing, I wanna say on average about 10%, particularly over the corporate private equity, broadly speaking, portfolio. Optimistic around kind of what that can continue to do. Across many of the businesses, we saw continued pricing power that enabled that to occur, to be seen in terms of how strong that pricing power continues and kind of the inflationary pressure and how that works against us.
You know, the good news is, I will say that, you know, the way it's, you know, we've constructed the portfolios, we're generally in good shape. Again, cash flowing businesses, you know, real estate's not in the bad areas, so like, you know, almost nothing in office or hotel or retail. Again, very good construction across, you know, both our private equity inclusive of real estate.
Great. Thank you.
One moment for our next question. Our next question comes from Gerald O'Hara with Jefferies. Your line is open.
Great, thanks. We've covered a fair amount of ground here this morning, but maybe just kinda touching base on the expense side, and, you know, clearly saw a pretty meaningful step up in G&A year-over-year. Obviously, a lot of growth initiatives going on, investing in the business. Perhaps, Curt, you could give us a little sense of how to think about that, as we, as we look to the next 12 - 24 months?
Thanks, Jerry, for the question. Good to hear from you. Look, any year where I can grow FRE 40% over the prior year, I'll take it however I can get it. If that means investing in the business, that's a great outcome to generate 40% FRE margin. With respect to, you know, cash and with respect to G&A, if you look at it on a quarterly basis, you know, Q4 versus Q4, pretty much flat, yes. On an annual basis, up. You know, actually think that we're very focused on, I know that we're very focused on managing costs and managing where we deploy our excess expenditures, and it's really around investing in new product development in distribution, you know, and investing for the future.
You know, there are clearly things that we're making investments in that will benefit us 2024, 2025, 2026 to enable long-term growth. You know, things like retail and private wealth really matter for that, you know, less so in terms of what it does to 2023 FRE.
Great. That's it for me. Thanks, gentlemen.
Thanks, Jerry.
One moment for our next question. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.
Great. Thanks very much. Most of my questions have been asked and answered as well. I just wanna come back to the actually to Investor Day targets that you laid out in 2021. You're tracking ahead of those targets already with the exception of FRE, which I guess you're on the way towards given it's a 40% target for 2024. Just wanted to get your conviction around reaching that level or is that going to be, you know, more of a Harvey decision in terms of, you know, potential new investments that you might be making and rather you'd rather just focus, like you said, on FRE growth?
Brian, good question. I look, you know, I'm incredibly proud of what, you know, Carlyle and the entire team has achieved 2021, 2022. You know, because we set out a target of $1.6 billion for 2024, $800 million of FRE, $800 million of carry for $1.6 billion of pre-tax DE. We've swamped, you know, that from an outcome perspective already in 2021 and in 2022. FRE at $834 million this past year, 40% up. I care much more about FRE dollars and growth in FRE dollars than I care about margin. Look, margin is a tool to generate FRE dollars. Whatever we can do to create more dollars, one tool is creating is by margin, but however I can get it, I'm gonna get it.
You're right, you know, we set a target of 40% of FRE margin by 2024. 2023, I think, you know, will probably be more on the flattish side to 2022, which will then cause, you know, pressure for 2024 to get to that number. You know, I still think we can do it. Look, we grew, you know, from 33%-37%, 2021 - 2022, so there's no reason we can't do that in 2023- 2024, but time will tell. Look, again, it's about growing FRE dollars. If I can get FRE dollars going the right way, that's what I'm gonna do.
That's loud and clear. Thanks for that. Then maybe just one last one. Just, I guess, you know, you talked a lot about fundraising, and the headwinds, obviously, on the private equity side. Maybe if you just characterize what you're hearing from LPs and other investors in terms of you know, now having Harvey on board and how much of a ballast that is to confidence in the franchise. Was that, you know, not so much of a headwind anyway? It was really just the, you know, the headwinds in the overall industry and less related to your, you know, to the leadership.
You know, this is Bill. In my discussions with the investors, I was in Europe and I was in Asia and Japan, and I would say that I didn't see anybody who didn't invest with us because I was the interim CEO and we didn't have a permanent CEO, and Harvey hadn't been named at that time. There were perhaps some people who delayed and wanted to think about the decision and wanted to know who it was going to be before they committed. I don't think there was any. I couldn't point to any investors saying they didn't do it because we didn't have the CEO.
I think they didn't do it now because we didn't have the CEO, and we'll see what happens when the CEO is named. I do think a far bigger factor than the CEO is the market. You know, the CEO is. Most of the fund investors, they care much, much more about the performance of their fund and the individual deals than they care about who the CEO is. Although I'm very excited about Harvey and I think he's gonna be fabulous, the market, I think, is a more important factor in terms of growth in the PE business fundraising.
Okay. That's great color. Thanks very much, Bill.
You're welcome.
One moment for our next question. Next question comes from Adam Beatty with UBS. Your line is open.
Good morning. Thank you for staying on. Just one question, it's got three parts, about the fundraising environment, not necessarily fund specific, but just kinda what you're seeing. Number one, you mentioned LP liquidity needs. I'm curious what's driving those, whether it's slower monetization or tighter financing or something else. Number two, big theme last year was denominator effect. How far along are LPs in terms of realigning around that and kinda getting past that? Number three is the reopening of LP budgets with the new year, is it similar to what you've seen in past years or better or worse? Thanks a lot.
Adam, it's Curt. I'll start and then Bill can add in. Look, it's always difficult to generalize these types of questions across all the different investor classes, and everyone. Everyone just, you know, take that caveat very seriously as I attempt to address some of this. LP liquidity needs in general were really, you know, due to the fact that a number of, you know, funds invested in deploy capital very quickly across the industry and have come back for greater needs faster than expectations. Then with the, you know, slowing down of the equity capital markets in particular, just as we're, you know, talking about buyout in general, you know, that has put some liquidity needs on some investors, not necessarily all.
I mean, there are parts of the world, Middle East in particular, where I don't think that those needs are as apparent as in other places. On the denominator effect, look, some green shoots early in the year in terms of potential changes with that, some resetting. I think that that will get better over the course of the year. Again, it comes back to each individual investor type and how they're viewing it. I think that that will play out. Also, again, you know, all investors are gonna be seeking yield, and I think alternative assets is a great place to seek yield. This industry has proven well, and it's just generally done better, and so it's more about getting them all access to this.
Then the new year, yes, that has an impact on, again, certain LPs and their allocations and how they work with their own investment committees. Yes, it is an impact for some, but you know, again, in terms of quantifying on a broader basis, really tough to kinda do. I don't know if you'd add anything.
Well, I would say I can't break it down by category, in terms of what the impact's gonna be. I think it's gonna be better than it was last year. I do think that the LP liquidity creates an opportunity for Carlyle. You know, we have a big solutions business of about $70 billion, and both in secondaries, primaries, co-investment, I think there's gonna be a lot of opportunity there, perhaps in some ways offsetting some of the primary opportunity, as LPs either reposition their portfolio or need liquidity for some reason, as Curt pointed out, not so much in some parts of the world, but in others.
That's great. Appreciate the nuance around liquidity. Thank you guys for tackling that.
Thanks, Adam.
I'm not showing any further questions at this time. I'd like to turn the call back over to Daniel Harris for any closing remarks.
Thank you all for your time and interest this morning. We look forward to talking with you again next quarter. Should you have any follow-up questions after the call, feel free to reach out to Investor Relations at any time. Thank you.
Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.