Good day, and thank you for standing by. Welcome to The Carlyle Group second quarter 2023 earnings conference call. At this time, all participants are in 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'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To remove yourself from the queue, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Daniel Harris, Head of Investor Relations. Please go ahead, sir.
Thank you, Norma. Good morning, and welcome to Carlyle's second quarter 2023 earnings call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz, Chief Financial Officer, Curt Buser, and Incoming Chief Financial Officer and Head of Corporate Strategy, John Redett. Earlier this morning, we issued a press release and a detailed earnings presentation, which is also available on our investor relations website. This call is being webcast, and a replay will be available on our website. We will refer to certain non-GAAP financial measures during today's call. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. We have provided 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 factors section of our annual report on Form 10-K, that could cause actual results to differ materially from those indicated. Carlyle assumes no obligation to update any forward-looking statements at any time. Turning to our results, for the second quarter, we generated $207 million in fee-related earnings and $389 million in distributable earnings, with DE per common share of $0.88. Our two carry balance was $3.7 billion as of the end of the quarter, and we declared a quarterly dividend of $0.35 per common share.
In order to ensure participation by all those on the line today, please limit yourself to one question and then return to the queue for any additional follow-ups. With that, let me turn the call over to our Chief Executive Officer, Harvey Schwartz.
Thanks, Dan. Good morning, everyone, and thank you for joining us. I'm excited to be joined today by John Redett, who you'll hear from later, as well as Kurt. There are two areas I'd like to cover. First, the macro environment, and second, a review of several work streams that will position us to drive long-term growth. First, the macro environment. As I've said previously, we're in one of the most complex periods in recent economic history. The combination of sustained elevated inflation, along with central bank rate hikes, has led to a corresponding increase in the cost of capital. The peak of the inflationary cycle may have passed, but our base case is that rates stay higher for longer as we shift away from a decade of zero interest rate policy. It remains early days in understanding the impact of this shift on corporate capital structures and liquidity.
Among other factors, this shift in interest rates further contributes to mixed investor appetite and sentiment. In part, our economic and market views are informed by the vast data and proprietary insights gathered from our portfolio. The dataset includes nearly 300 global companies, 600 real estate investments, and loans to over 1,300 issuers. Let's start with inflation. We're starting to see it's more difficult for our portfolio companies to pass through increased costs, reinforcing the view that the inflationary cycle has peaked. Our portfolio company CEOs remain generally cautious in terms of how they're approaching the operating environment, but broadly, our portfolios have seen accelerating activity with over 10% EBITDA growth. As you'd expect, these economic forces have slowed the pace of investment across the industry.
You see this in the amount of capital we are deploying, you see it in lower fundraising as LPs slow decision-making on new fund allocations. Having said that, in general, our teams are seeing signs of an increasing pace of early deal flow access across most asset classes. I want to update you on five key areas that we are focused on as a leadership team, though these are just a sample of activities around the firm. We have mobilized teams and launched work streams for each of these. As you'd expect, we are approaching these in a very deliberate and methodical manner. While early, let me give you a line of sight into what we're doing. First, our insurance solutions business. Our relationship with Fortitude is profitable, strategic, and vital, but only one piece in the opportunity set.
As insurance companies look to free up capital and shift liabilities to improve their ROE, we're seeing a greater interest on their part to partner with us in a variety of important ways. Second, our capital markets team. They also have a large opportunity to scale their impact. We have in place today all the key ingredients for growth: a well-positioned and active private equity franchise and an experienced capital markets team. As activity rates pick up, we expect that we will further leverage our deal flow and our portfolio companies' need for capital to create a natural tailwind in this business. Third, we're also focused on our technology and our AI strategy. This allows us to create operational efficiencies across the firm, as well as at our portfolio companies, and is an important driver of growth and scale over the long term.
We recently appointed Lúcia Soares as our new Chief Information Officer and Head of Technology Transformation. She will work closely with the entire leadership team to drive technology transformation strategy and operations. Fourth, as we said before, we see long-term opportunity around private wealth. We've recently hired a new head of private wealth strategy. While we only have three products in the market covering $5 billion of assets today, we view this as an important channel for growth. We'll be working with our distribution partners to bring product innovation globally to the wealth channel. Most importantly, the Carlyle brand is a huge differentiator here. Fifth, the last work stream I'll mention is around expense management and improving FRE margin.
This means investing in our platform wisely to drive top-line growth, as well as closely monitoring the overall level and composition of expense, as well as the capital required to run the firm. This is a critical strategic effort. We will continue to move with a disciplined sense of urgency around each one of these, and we'll continue to update you as these progress. To close, as I said, we're still operating within a somewhat challenging market backdrop. It's important to state that we will be patient when we need to be, while at the same time capitalizing on opportunities to deploy capital where we see attractive risk reward. As a leadership team, we are intensely focused on delivering performance excellence for our investors and driving long-term shareholder value. We are taking action to mobilize teams around priority areas to drive disciplined growth, and I'm really enthusiastic for Carlyle's future.
Now before I hand it to John, I'd also like to take a moment to thank Kurt for his tremendous contributions to Carlyle over the last nearly 20 years. I personally am thankful for Kurt's counsel and support as I transitioned into Carlyle over the past six months, and I've really enjoyed getting to know him. I know you'll all join me in wishing him the best in his upcoming retirement. Now, John, over to you.
Thanks, Harvey. Good morning, everyone. I also wanna thank Kurt for his 20 years of leadership at Carlyle and for the guidance he continues to provide me as I transition into the CFO role. I look forward to working more closely with many of you in the coming periods. As Harvey highlighted, we delivered solid results this quarter in a tough environment, driven by a diversified investment platform and the focus of our global investment teams. We've produced $389 million in distributable earnings for the second quarter, or $0.88 in DE per share. Year to date, we have generated $660 million of DE, or $1.51 in DE per share. We repurchased $60 million of shares in the second quarter and have repurchased $160 million in the first half of the year.
Today, I'm gonna focus my remarks on three main areas: fee-related earnings and the near-term outlook, accrued carry, and fundraising. First, fee-related earnings. FRE increased to $207 million in the quarter, up from $193 million in Q1 2023. Relative to the second quarter last year, FRE declined 12% as modest growth in revenue was offset by continued investment into our people and teams. Year to date, FRE of $401 million was down 5% compared to the same period last year. Second quarter management fees of $515 million increased sequentially after having declined for a few quarters, with increases in each of our segments. Over the next few quarters, new fund launches and fee activations should support continued management fee growth. Our second quarter results benefited from $73 million in fee-related performance revenue.
Looking ahead, we are not expecting to generate material fee-related performance revenue in global private equity in the second half of 2023, though global credit fee-related performance revenue should remain stable. Transaction and advisory fees were $18 million in the quarter, down significantly from a year ago, given muted capital markets activity, which has pressured both FRE and the margins. As you heard from Harvey, driving an increasing level of transaction revenue from our investment platforms is a major focus area for the firm. Compensation expense was $289 million in the second quarter, an 11% increase year-over-year. A majority of the increase this quarter was a function of higher fee-related performance revenue, as we generally accrue compensation at 45% of associated revenue. Excluding this impact, compensation expense increased only 5% year-over-year.
G&A expense of $102 million reflects a more normalized set of firm-wide activities relative to lower levels we saw during the pandemic. This quarter also included external fundraising costs, largely captured in Global Investment Solutions, which supported fundraising momentum. G&A expense may tick up in the back half of the year, as we typically have increased operating costs tied to our LP conferences. With regards to our FRE outlook, second half 2023 FRE is likely to be similar in the aggregate to the first half of 2023, with a relatively stronger fourth quarter. We remain focused on generating sustainable top-line revenue growth, as well as diversifying and growing FRE. Moving on, I'd like to discuss our net accrued carry. Our global carry fund portfolio appreciated 2% in the quarter, with relative strength in infrastructure and natural resources, owing to an uptick in announced transactions.
We had more muted appreciation in private equity and real estate. Our Net Accrued Carry balance of $3.7 billion declined from $4 billion last quarter. Most of this decline was driven by $175 million in net realizations, with the balance due to a reduction in Accrued Carry in Global Private Equity. Even with this decline, the net accrual remains at a robust $10 per share, which is a substantial source of future shareholder value. Let me finish up with an update on fundraising. Fund investors continue to face challenging decisions and make commitments more slowly than in previous years. Despite this slowdown, we still expect to raise a larger amount of capital in 2023 than we did in 2022. Through the first half of 2023, we raised $14 billion of new capital, approximately halfway to last year's fundraising total.
We have momentum in several important strategies that should see inflows in the second half of 2023, likely weighted towards the fourth quarter. In Global Investment Solutions, we are off to a good start for our latest vintage secondaries and co-investment strategies, which should both continue into the second half of the year and into 2024. This new capital will turn on management fees later this year. In global credit, we expect to grow off a slower start to 2023. We've priced two CLOs in the second quarter after none in the first quarter. Our Credit Opportunities Fund should continue to attract more capital, and a number of strategies and SMAs are positioned to generate positive flows, with the fourth quarter likely to be relatively stronger than the third quarter.
In global private equity, we expect to raise capital in the second half of the year in several buyout funds and various real asset strategies. Wrapping up, let me reiterate my excitement to be in this new role, working alongside Harvey and the entire Carlyle team to drive shareholder value. We are excited about the opportunities for continued growth and improved operational performance. With that, let me turn the call over to the operator for your questions.
Thank you. As a reminder, to ask a question, you'll need to press star one one on your telephone. To withdraw your question, please press star one one again. Please wait for your name to be announced. We ask that you please limit your questions to one. Please stand by while we compile the Q&A roster. One moment for our first question, please. First question will come from the line of Alexander Blostein with Goldman Sachs. Your line is now open.
Great. Thanks. Good morning, everybody. Harvey, maybe we can zone in on some of the key priorities that you mentioned in your prepared remarks, really starting, I guess, on the last one you highlighted around the expense structure and, and FRE margins. Could you just hone in a little bit more in terms of what that means? You obviously came into the business with a fresh pair of eyes, so curious how that could impact compensation mix and ultimately the FRE margins longer term for the firm.
Sorry, when you said it, it would impact which mix? Alex, I didn't hear you.
Comp and comp. Yeah, compensation.
Okay, fine. I got you. Thanks. Yeah. Okay, thanks for the question, Alex. Good to hear your voice. This is a critical work stream. We kinda gave you a flavor of the 5. There are more than those, obviously. As I settled into the seat, Kurt and I kicked off a work stream that was really focused on FRE margin and how we wanted to think about that. Obviously, he's in the process of handing that baton over to John. You know, we could talk about both the top-line growth, you narrowed in more on the compensation piece and the expense piece. You know, we're basically doing a line-by-line review, going through the business and making sure we're super disciplined about expense. Now, as it relates to compensation, that's obviously a critical component of it.
The way we're approaching that is, as you've heard me say before, very first principle phase. What I mean by that is, we're gonna start with the things that are most critical around compensation, and that, as you know, is making sure that we have a really, really, as perfect as we can, alignment with our constituencies, our LPs, our employees, and our shareholders. At this stage, you know, I think we're making good progress on the work stream. I think there's a real opportunity here. Importantly, as it relates to our team, we wanna make sure that they're aligned with the LPs, that we retain and attract the best people, and we really want to reward people for performance.
As a first principle, I would just say we're taking a white sheet of paper to this, and we're being very thoughtful about it. Did I lose you?
Thanks, Alex. Thank you.
Thank you. One moment for our next question, please. Our next question comes from the line of Ken Worthington with JPMorgan. Your line is now open.
Hi, good morning. Thanks for taking the question.
Hey, Ken. How are you?
Hi, good morning. John, maybe just starting high level, can you give us some background on your time at Carlyle and your decision to transition to the CFO role? Maybe following up on Alex's question, sort of FRE margins dipped in the quarter. Can you talk us through the outlook for margins in this context of challenging market backdrop, number of fund launches, but increased investment? Basically, how do you see the direction of fee margins evolving as we go into the back half of the year?
Thank you, Ken, and I look forward to meeting you at some point in the near future. Just quickly on, on the first part of your question, and, and on my background, I've spent my entire career in financial services, the last 16 years in private equity at Carlyle. While, while at Carlyle, I focused on investing in financial services globally. A large component of that job, Ken, was the value creation at the portfolio company level. And I would just add the, the financial services team has a great track record at Carlyle.
... When, when the CFO opportunity was, was presented to me, honestly, it was the easiest career decision I've ever made. It was an easy yes. I'm super excited to be in this role, starting October first, and I really look forward to working with Harvey and the team to further drive shareholder value. In terms of your second part of your question, the, the FRE margin, I would just say, look, we, we know we can do better. As Harvey mentioned, we're very focused on expenses and margin, and more importantly, we're very focused on delivering disciplined revenue growth. I would just say, as we make progress on, on these work streams, we'll keep you updated in the coming periods.
Okay, great. Thank you.
Thank you. One moment for our next question, please. Our next question comes from Brian McKenna with JMP Securities. Your line is now open.
Thanks. Good morning, all.
Morning, Brian.
Harvey, you've been in your seat a couple quarters now. I know you continue to analyze the business, and I'm assuming it might take some more time for you to frame out the longer-term trajectory of the firm. But do you have any early expectations on what you think the underlying growth at Carlyle could look like over time, based on everything you've seen thus far, and then just, you know, based on some of the growth initiatives that are underway?
Yeah, great question. You know, I think I'm coming up on six months, and I think I've seen on almost 150 LPs. I traveled 40 days. I've met with teams internally, and I could not feel better sitting here today than I ever would have imagined about the future of Carlyle and the growth opportunity. I say that feeling quite informed on a number of levels, the power of the brand and the dialogue with LPs directly. Obviously, part of my view on this and how I feel is informed by what I think is the trajectory for the industry, which I think is, is fantastic. It, it may not be fantastic quarter to quarter, but I think the long-term trajectory of the industry is, is quite good.
You know, when I think, when I, you know, I tried to give you some flavor of how we're now turning our focus to these work streams, and the work streams allow us to do a number of things. They obviously allow us to prioritize growth, whether it's in insurance, it's in capital markets, it's in credit, various parts of our businesses. Also, it allows us to focus on margin and how we want to think about the composition of compensation and things I've already talked about. Another thing that it serves is, it really brings the team together, and I feel great about the way the team is coming together in terms of the focus, and this is engagement across, you know, including, obviously, John, Kurt, myself, and the team that you know better.
This includes some of the best investors in the world, which I've brought together on various work streams. I feel great about the momentum. This is not gonna be an immediate third, fourth quarter thing. If you ask me about the long-term trajectory, I felt really excited when I got here in February. I feel better now.
Super helpful. Thanks, Harvey.
Sure.
Thank you. One moment for our next question. Our next question comes from the line of Chris Kotowski with Oppenheimer & Co. Your line is now open.
Hey, Chris.
Chris, we can't hear you.
Chris, your line may be muted.
We can come back to him, operator.
We'll go to the next person. One moment, please. Question comes from the line of Benjamin Budish with Barclays. Your line is now open.
Hi, good morning, and thanks for taking the question. I wanted to ask about your-
Morning.
Good morning, Harvey. I wanted to ask about your fundraising expectations, particularly in the private equity side. You know, I know in your prepared remarks, you indicated that the pace of investment is, is slowing, the fundraising is slowing in general, but as broader markets are kind of recovering, maybe the denominator effect issues are sort of getting resolved a little bit. Any, you know, and, and as you're sort of seeing some kind of green shoots for overall transacting activity, any kind of increased optimism or updated expectations for sort of the next vintage of private equity funds, thinking, you know, Asia buyout, Europe, Japan, the ones that are kind of expected to come later this year and into 2024?
Broadly speaking, on fundraising, as we said, we, we feel this year is gonna be better than last year. That's broadly across the diversified platform, right? Solutions, there's a lot of momentum. There's a lot of momentum in credit. There's a lot of momentum across the insurance complex. We feel good about that. There's a lot of momentum in real estate. Private equity, still some headwinds, globally when you go around the world. We feel optimistic about certain aspects of the fundraising that are in the market right now. I can't obviously get into specifics because they're in the market right now. I would say, you know, our comments that you heard in the prepared remarks, generally how we feel about it for the balance of the year, but a lot of momentum in those other areas.
Okay, great. Thanks so much.
Thank you.
Thanks, Ben.
One moment for our next question. Our next question comes from the line of Glenn Schorr with Evercore ISI. Your line is now open.
Thanks very much.
Morning, Glenn.
Good morning. You, you gave a bunch of comments that talked second half versus first half, and I, and it was very clear that weighted towards fourth quarter, given that we're in the third quarter and it's kind of slow right now. I wonder if you can help dimensionalize how much weighted fourth quarter versus third quarter in some of those items. Then, and then when thinking about,
... growth. You, you talk optimistically about credit insurance, but I was wondering if we could get a little bit more. CLOs are, are in the process of recovering, knock wood, but what else is going to drive growth? Because there is the opposite of private equity, the private credit backdrop feels pretty good. Maybe if you can talk a little bit more on insurance and direct lending. Thanks.
Sure. I mentioned in the work streams, we mobilized an effort around insurance. Obviously, we, we have Fortitude. It's a hugely valuable asset and our ownership there. We mobilized work streams around that, in some respects, in exactly the way you've talked about, Glenn, because the adjacencies between insurance origination, where the pipeline is very, very good for further transactions, and the desire to work with Fortitude is a natural creator of flow into our credit business. Again, this is not a third or fourth quarter event. This is longer term. I can tell you about the momentum we see and the pipeline that we see.
Also, as it relates to our credit franchise, the performance has been good and a little slower than we expected, but it feels good in terms of the pipeline of fundraising, and the team feels confident for the back half of the year. I feel good about the trajectory of all those pieces. Of course, there's adjacencies in there with capital markets in terms of how we distribute and how we bring all that together. That is really the purpose of bringing these work streams together. It's just about mobilizing the teams around these opportunities. I would say we feel good about that. I can't pin it down to third quarter, fourth quarter, and we don't really run the company that way, Glenn, as you know. It's certainly not the way I think about things.
I feel very, very confident about the trajectory and our focus on FRE margin and the things we talked about.
Okay, thanks.
Thank you.
Thanks, Glenn.
One moment for our next question. Our next question comes from the line of Brian Bedell with Deutsche Bank. Your line is now open.
Great. Thanks. Good morning, folks. Thanks for taking the questions.
Hey, Brian.
Hey, good morning. Maybe just get back on the FRE margin and trajectory and, and, and really let's think about next year, not the second half. If we could put aside insurance solutions, and you've talked, Harvey, about building up the capital markets effort. It sounds like you have the raw ingredients there to do that right now, so I'm assuming that that can be leveraged quite well. As we move into next year, do you view that FRE margin expansion as more of an element of, of revenue growth and scaling the business or, or more coming from, expense initiatives?
You mentioned compensation is, would that be including any kind of change in structure and compensation, and such as moving comp, you know, more comp out of FRE and into, into performance-based revenue?
Okay, thanks. Let me unpack that a little bit. I just want to make sure I hit your points. On FRE margin, that is, as I said, that's a critical work stream for us. What does that mean? That means driving growth for the top line, but it also means being exceptionally disciplined in terms of expenses and how we're thinking about capital deployment. As I said, we started this process with Kurt, now, you know, we're transitioning that over to John. I feel very good about the momentum of that, given how long I've been here and how focused the team is. The trajectory there should be good. With respect to compensation, again, we want to make sure we get this perfectly right for our teams and the alignment for our constituencies.
Yes, compensation and the composition of compensation and making sure we reward our best people, and again, at the same time, aligning with our constituencies and our LPs, yes, 100% that's on the table. Too early to give you details on that. As soon as we have them, we'll share them. That's a process, and we're going to be very methodical. I can tell you, as it relates to FRE margin, both growth and also expense management, we're laser-focused, and you should hear it no differently. Okay. You had a question inside there where you talked about capital markets, which I just want to drop into for a second. I don't want to minimize it. It's not rocket science, okay. We're not building space shuttles over here for capital markets.
Basically, all we're doing is mobilizing the team to work in the adjacencies a little bit differently. We're not going to build up a big team. We don't want to be competing with the JPMorgan's of the world, but we do think there's a real valuable opportunity set here where we can provide incremental revenues without any significant need to scale.
Yeah. Yep, that, that's great color. Thank you.
Sure. Thanks.
Thank you.
Thanks, Brian.
One moment for our next question. Our next question comes from the line of Michael Cyprys with Morgan Stanley. Your line is now open.
Hey, good morning. Thanks for taking the question. If we look out the next couple of years, it seems like you guys are set to generate substantial cash flow across the business. Just curious how you're thinking about deploying that cash generation, what portion might be returned to shareholders versus what portion might you retain for organic growth versus inorganic, and how important or meaningful could inorganic opportunities be at this point?
For me, it's a math question. I don't want to oversimplify it. I think it's a question of really just thinking through the strategic opportunities that may be presented us versus returning the capital. As we talked about before, right now, I think the opportunities to return capital to shareholders may be more attractive, but that's a moment in time. I think that when you look at the position of the firm and the footings of the firm in terms of what we have, We have an insurance investment, which is quite critical to the firm, so we don't need to go out and acquire one. We have a credit business, which is continuing to build organically. We have the solutions business. All the component pieces are here.
I wouldn't rule out, certainly strategic partnerships where we think they could accelerate growth, but they'd have to be a really good fit. Again, I know this is, this is always the case, everybody says this, the math just has to make sense. We'll make those choices at the margin when presented. The brand's very powerful, and, you know, if there's opportunities for us to scale in ways that are inorganic, we'll certainly consider them. Right now, I would say that's not front and center, but I wouldn't rule it out over the long term.
Thank you. One moment for our next question. Our next question comes from the line of Rufus Hone with BMO Capital Markets. Your line is now open.
Hi, good morning. Thanks very much. Maybe coming back to the private wealth opportunity, and I'm curious to get your thoughts around what the Carlyle product set and the wealth channel might look like two or three years from now, and not just in the US, but internationally as well. Thank you.
Yeah. So this is where we-- this is where we feel like the brand is a very, very powerful differentiator. The name recognition, you know, the presence of the founders, and what they represent for the firm, and David Rubenstein and sort of the, you know, it's iconic, and everybody in the world knows it. Again, we're at the beginning of this journey. I actually would say, my opinion, the industry's at the beginning of this journey. I think product development will continue to improve. I think there'll be real innovation in the product over the next couple of years. I think as a, as the team at Carlyle, we're going to be very thoughtful about this.
We only have three products in the market right now, but this is a place where, you know, we want to make sure we have our market share, and so we're going to be focused on it. It's early in the journey.
Thank you. One moment for our next question. Our next question comes from Patrick Davitt, from Autonomous Research. Your line is now open.
Hey, good morning, everyone.
Good morning, Patrick.
I think there were a couple of chunky realizations that, that helped the 2Q performance fee. How are you thinking about realizations in the second half now, relative to your tone on the first quarter call? Is there a tangible pipeline you can speak to or a tangible pipeline building you can speak to now? Thank you.
We wouldn't want to have this call without Kurt ever opening his mouth. Kurt, Kurt looks like he wants to actually speak. Patrick, we're going to let Kurt take a question. I think that the poor guy is just dying to have one question on this call.
Thanks, Patrick. I appreciate the question. Before I answer, let me just say thank you. Thank you really to, you know, all of our shareholders. I want to say thank you to our founders. I want to say thank you to really all the analysts that follow us. It's been great working with you over this time. It's really been an honor and privilege for me to serve in this role, and I have total confidence in Harvey and John's leadership taking it forward. Look, we got a great team at Carlyle, big, big bench, lots of tenure on the team. It's just really been a great honor. In terms of realizations, look, we got $3.7 billion of net equity carry, roughly $10 a share, just as John said.
You know, we, we delivered $1.5 billion of net carry realizations in 2021. In 2022, it was roughly $1 billion. First half this year, $245 million. Look, it's really hard, as I've said in the past, to, like, call it, you know, to, to the nickel on, you know, which deal is going to close when and how all that plays out. I, I would kind of think, you know, second half of the year in total is going to look more or less like the first half of the year on, on carry. It's, look, that's a, that's a guess, and things can slide and, you know, until activity really picks up again, it's a hard thing to really nail down.
Again, $3.7 billion, that's a lot of carry and, you know, we're very excited about that to be able to turn that into cash.
Yeah, I view that as, as just a war chest at $10 a share. It's incredible.
Thank you. One moment for our next question, please. Our next question comes from Craig Siegenthaler with Bank of America. Your line is now open.
Hey, good morning, everyone.
Good morning, Craig.
Good morning.
My question is on the capital markets business. You know, I know you're looking at, to grow this business, and at the 2021 Investor Day, Carlyle provided a transaction fee target of greater than $120 million by 2024. I'm just curious if this target is still valid as, as we think about updating our models.
I, I wasn't here in 2021, so I can't speak to that, but we haven't set targets. I can, I can give you a little insight into how we've been focused as a team, and maybe this is more of an insight than you want, but we're systematically working with the work stream that we mobilized. We're systematically working business by business to ensure that we have the right connectivity, the right plan, literally across every pocket of the firm in terms of how we want to drive value here. I think that as a business, I think it's a difficult business to predict. It's it's gonna have an episodic nature to it because it's gonna be sensitive to market activity, and we're not looking to be a giant capital committer here.
This is really about us moving the ball from, you know, being very small at $15 million to marginally growing. We'll come back to you at a later date. I, I, I would, I would personally be reluctant to put hard targets out there. I can give you some sense of scope when we look backwards, at opportunities and the way that we approach them versus the way we would now, the opportunity looks meaningful, and I feel good about it.
Thank you, Harvey. Kurt, it's been great working with you.
Thanks.
Best of luck with the-
Hey.
With your next venture.
Thanks, Greg. Really appreciate it, and it's been fun.
Thank you. One moment for our next question. As a reminder, ladies and gentlemen, that's star one to ask your question. Our next question comes from the line of Adam Beatty with UBS. Your line is now open.
Hi, thank you, and good morning.
Morning.
Just to follow up. Good morning. Follow up around realizations. I don't know if Kurt gets a twofer out of this, but there's been press during the quarter and more recently around a potential monetization of a significant holding in China. Obviously, I don't expect you to comment on a specific deal, but I just wanted to broaden that out because the other part of the press piece was that the asset might be included in a continuation vehicle. I wanted to broaden that out and just ask about the potential use of continuation vehicles at Carlyle, given the amount of mature assets that you have in different portfolios, and the potential benefits of that for the firm. Also maybe a comment on the deal backdrop in China. Thanks a lot.
Adam, hey, thanks for the question. Let me make a few comments here. First, you know, we, we focus on our business operations across Asia. We've got a great track record there, and the team does just a phenomenal job, you know, really operating across Asia, China, India, and many of the countries in that arena, feel really good about the team and what they've accomplished and what they continue to do. I'm, I'm hesitant to talk about any specific deal because things aren't done. continuation funds are, are tools that we look at. There's, there's complexities with continuation funds, as you're all aware. It's, it's not something that we, you know, routinely do. We, we spend a lot of time thinking it through and examining all of the potential conflicts around that.
Really, it's premature to comment any, on anything specifically on this. I would say that those things also take some time to kind of pull together. Comments I made before in terms of the second half are still the right way to think about it, for your near-term modeling.
Sounds good. Appreciate it, Kurt. All the best to you.
Hey, thank you.
Thanks.
Thank you. One moment for our next question. I have a follow-up with Michael Cyprys with Morgan Stanley. Your line is now open.
Oh, great. Thank you. I was just hoping you could maybe elaborate a bit on the deployment pipeline and the potential for new deal activity. Maybe you could talk a little bit about how you're seeing that backdrop evolving, how are terms and structures adjusting? Given the improvement in equity markets and reduction in volatility, what seems like peak Fed funds here, I guess, what are the key hurdles you see at this point for deals getting announced and getting completed?
Well, I, I'll, I'll give you my perspective on that. I would say that from the deal team perspective and the flows we're seeing, and, I would say there's been a marked improvement in sentiment. I think we can be more optimistic about deal activity going forward. I'd say the market still feels fragile. CEO confidence is improving, but we've had a major shift, obviously, in the cost of capital, which I talked about, and I think it across the marketplace, that's still being digested. Of course, this will be worked through. That, that would give you that perspective at, at a high level, but we're seeing some interesting opportunities. Our teams are being very selective in deploying capital. John, I don't know if you want to add anything to that.
Yeah, look, I think it, it comes down to confidence, and I think you're starting to see the level of confidence increase among executives, and I think that's a positive thing. I, I do think we're still absorbing the high rate environment we're in. I think that caught a lot of people off guard. Thankfully, we, we've hedged most our, our capital structures. I, you know, look, I, I, I think you're gonna start to see more activity. Looking at our pipelines across the platform, our pipeline logs are looking a little better, I think it's gonna take time.
Any particular areas where you might expect activity to return first versus what may take a little bit longer and, and what may not come back?
You know, I, I, I would say, I think you're gonna see activity come back in, in private equity, in, in credit, pretty much the same time. I, I don't think one is necessarily ahead or behind the other.
Okay. Thank you.
Thanks, Mike.
Thank you. I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Daniel Harris for closing remarks.
Yes. Thank you, operator, and thank you all for your time this morning and of course, your interest in Carlyle. If you have any questions, feel free to follow up with invest relations after the call, and have a great day.
This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.