Thank you, Kevin. Good morning, and 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 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. Earlier this morning, we issued a press release and a detailed earnings presentation, which is also available on our Investor Relations website. I'm going to 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 entered 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, and our debt ratings from both S&P and Fitch improved to A minus 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 2 years. This higher dividend will begin with Q1. And 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 being with us today. I'm happy to participate in this call to discuss Carlyle's Fourth Quarter and Full Year Results. As you've heard, Carlyle achieved strong results for our stakeholders despite the challenging market conditions. The firm is performing well, and I have great confidence in our ability to seize investment opportunities and continue growing our platform in 2023. I will address three topics this morning: the conclusion of our CEO selection process, Carlyle's strong financial performance in 2022, and some overall thoughts on our outlook. First, we are thrilled that Harvey Schwartz will join Carlyle as the new CEO on February 15. This was a very important decision for Carlyle. The search committee of the Board, on which I serve, conducted a thorough and exhaustive search for a new CEO. After a comprehensive and competitive process, Harvey was unanimously selected by the Board as the ideal leader to guide Carlyle into its next growth phase. Harvey is a highly respected business builder with extensive leadership experience in a competitive global financial firm. He is an experienced operator with a proven track record of leading and developing diverse business areas and shown capability in investing in and nurturing the talent and structure necessary to manage these businesses. Looking ahead, there are significant opportunities for growth and transformation at Carlyle, which will lead to sustainable long-term results. Harvey possesses the experience and skills to fully capitalize on this potential. As CEO, he will develop and implement a strategy that drives the diversification plan the firm has been pursuing, as well as identify new investment opportunities to further enhance performance and growth. I am confident in Harvey's leadership and eagerly await the chance to introduce him to you soon. Next, I'd like to highlight our 2022 results. Curt will delve deeper into our financials, but I want to mention a few key points. As Dan noted, we achieved record fee-related earnings of $834 million in 2022, a 40% increase from 2021, which shows that our strategic emphasis on growing FRE and diversifying our earnings has paid off, and we realized $1.9 billion in distributable earnings despite a fluctuating exit environment. Our investment returns across the portfolio were attractive. Our total carry fund portfolio appreciated 11% over the year, whereas public markets fell by about 20%. As I mentioned last quarter, portfolio construction and risk management are crucial, and we believe this is the key differentiator that enables our investment teams to deliver superior performance across market cycles. Now, regarding our outlook. As we enter 2023, we feel confident in the robust foundation of our firm and believe we are well-positioned to seize new growth opportunities. Harvey will focus on building off this strong foundation. At its core, our business revolves around raising capital, investing it, and increasing the value of our investments. Let's discuss fundraising briefly. The environment for raising new capital is undoubtedly challenging, with some headwinds more pronounced in certain areas than others. However, the market conditions we face now are different from those at the start of 2022. A sudden and sharp shift in market sentiment early last year caused investors to be cautious for most of the year. With rapidly declining public equity and debt prices, the denominator effect significantly reduced LP interest and the ability to make new commitments. Recently, at least until last week, we've observed a gradual decrease in market volatility. Investors seem to have a better understanding of potential interest rate changes. Additionally, Carlyle's long-standing relationships with the largest and most sophisticated global investors continue to be a significant advantage, and we see steady demand for many of our investment strategies across our three global segments. Our platform has diversified, and it’s noteworthy that approximately two-thirds of our fundraising last year stemmed from segments such as Global Credit, Global Investment Solutions, natural resources, and real estate. While corporate private equity may face ongoing challenges, we see considerable capital-raising opportunities throughout our platform. We expect to have more strategies raising capital in 2023 than in 2022, including our flagship funds and credit opportunities, secondaries, co-investments, and buyout funds globally. Our overall fundraising volume in 2023 is anticipated to exceed the $30 billion raised in 2022. In recent months, I've traveled extensively speaking with our teams and investors, and I am confident in the strength of our platform. Our investors appreciate our partnerships, global presence, and ability to construct diverse, high-performing portfolios. With Harvey's arrival, some uncertainty regarding our future direction as a firm has been resolved, which we believe will positively impact fundraising. Concerning capital development, current market conditions present new opportunities for investing across all our global businesses. Recently, we've experienced a wider-than-usual gap in pricing expectations between buyers and sellers, which has affected capital development. This spread has been more pronounced in private equity compared to other strategies, but we’re starting to observe signs of this gap narrowing. As debt and equity capital markets continue to open up, we expect deal activity to pick up. We deployed a record $35 billion in capital in 2022, balanced across equity, credit, and solution strategies, and we are well-prepared for additional investment with $72 billion in dry powder to leverage an improving environment. In 2023 and beyond, we anticipate ample opportunities to make new investments on behalf of our fund investors. Furthermore, the improving deal landscape offers our global credit business a chance to provide unique capital solutions. In 2022, we underwrote $3.9 billion in new loan activity in our direct lending strategy, and our CLO team issued nine new CLOs while trading $30 billion across their portfolios to better position them for the expected economic climate. As fund investors continue to seek liquidity, our secondaries and co-investments business is well-placed to meet this demand. Overall, 2022 was a strong year for Carlyle across most financial metrics, and we begin 2023 with strength and momentum. With Harvey as our new CEO alongside our excellent leadership team, Carlyle is well-positioned, and we are optimistic that he will build on this momentum to enhance the firm’s standing and create value for all our investors and shareholders. Now, I will hand the call over to our Chief Financial Officer, Curt Buser, to provide more detail on our financial results.

Thanks, Bill, and good morning, everyone. I want to highlight several points Bill made regarding Carlyle's strong position as we begin the year. We believe our investment portfolios are robust and adequately prepared for economic fluctuations. We anticipate delivering long-term appealing performance for all stakeholders. In 2022, we generated $4.34 per share in distributable earnings, showcasing our firm's significant cash earnings potential. Over the past two years, we have earned over $9 in distributable earnings per share. We are committed to increasing fee-related earnings, which grew by 40% in 2022, and our five-year compound annual growth rate for fee-related earnings stands at an impressive 34%. Our earnings mix continues to diversify, as we have expanded our capabilities in credit, insurance, capital markets, and solutions. The growth in fee-related earnings is not reliant on a single fund or strategy but rather is a result of broad top-line revenue growth across our global platform. In 2022, our top-line fee revenue grew by 25%, attributed to three main factors: first, raising capital and expanding our traditional high-performing investment strategies across our three global segments; second, organically developing new fee-generating businesses like opportunistic credit, insurance, capital markets, and infrastructure credit, all of which contributed significantly to our fee revenue; and third, we have actively pursued new inorganic earnings streams, such as enhancing our CLO business with CBAM and our advisory deal with Fortitude. These initiatives have scaled our platform and allowed us to increase our full-year fee-related earnings margin to 37% in 2022, an improvement of nearly 400 basis points from 2021. Our fee-related earnings margin has more than doubled in the last five years, achieved while we continued to invest in new product development and improved distribution capabilities, especially in the private wealth sector. We expect to maintain our fee-related earnings growth in 2023, with first-quarter results likely aligning with Q4 of 2022 before rising in the year's second half. Furthermore, we are optimistic about our potential to grow fee-related earnings into the double digits over the mid- to long term, in line with or exceeding market trends in the private capital industry. Consistent growth in fee-related earnings is bolstered by the attractive investment returns we deliver to our fund investors. Our investment teams have once again outperformed public benchmarks, despite rising discount and cap rate assumptions in our valuation models and increased apprehensions about a global recession. Although only 6% of our carry fund portfolio was publicly traded at year-end, public market comparables are a key component of our valuation approach and generally contributed to lower valuations across our private assets during the year. However, the primary driver of any investment's valuation is the performance at the asset level, which has generally reflected revenue and earnings growth, albeit at a slower pace in the second half of 2022. Our solid performance also benefits from our strategy of deploying capital in sectors where we possess extensive industry expertise and experience. Our real estate funds saw a 16% appreciation in 2022, our Infrastructure & Natural Resource funds achieved an impressive 48% increase, while our Corporate Private Equity funds grew by 6%. For the year, we generated $34 billion in proceeds, resulting in another year with $1 billion in net realized performance revenue, which aligns with our expectations for a typical year. Looking ahead, our net accrued carry rose by 2% year-over-year to $4 billion, with robust portfolio appreciation surpassing strong carry realizations. We concluded the year with $138 billion in fair value across our carry funds, reflecting more than a 10% increase compared to year-end 2021. Overall, we expect to generate around $1 billion in annual net realized carry, though realized performance income may vary based on market conditions. Industry activity rates have significantly slowed recently as buyers and sellers seek a middle ground in valuations. Funding markets, while still accessible, are less favorable than a year prior. Carlyle has also seen a slowdown in new investment and realization activities, leading us to anticipate a quiet start to 2023 for deployment and realizations. As a result, transaction revenue and realized performance income are expected to be lower over the next quarter or two. If we see improvement in industry activity, our expectations for transaction revenues and performance income will also rise. Now, let me briefly summarize each business segment. Global Private Equity had another strong year, with fee-related earnings increasing by 34%. Support from strong appreciation in Real Estate, Infrastructure, and Natural Resources contributed to a rise in net accrued carry to $3.5 billion, after more than $900 million in net carry realizations. The $20 billion invested capital was similar to $23 billion in realized proceeds, positioning Global Private Equity for continued attractive distributable earnings. Global Credit remains our fastest-growing segment, benefiting from both organic growth and strategic transactions. In 2022, top-line fee revenues increased by 46%, leading to a doubling of fee-related earnings to $225 million, with margins up nearly 1,000 basis points to 37%. Strong investment performance generated $70 million in net realized performance revenue. Our credit interval fund provided attractive returns, with a 10% dividend yield, while ongoing net inflows increased managed assets to over $2 billion. We raised $15 billion across 11 strategies in Global Credit and anticipate an active year of fundraising for additional strategies in 2023, setting the stage for further growth. Additionally, we are focused on assisting Fortitude in exploring new growth opportunities, which will lead to incremental advisory revenues. In Global Investment Solutions, we are well positioned for growth as we commence fundraising for our flagship products, including new vintages in our co-investment and secondary strategies. Fee-related earnings reached $69 million in 2022, down from 2021, but we expect growth later in 2023 as these strategies attract new capital. With $374 million in net accrued carry and strong fund performance, performance-related revenues are set to increase over time. In summary, we delivered strong performance for our stakeholders in 2022 and are well-prepared for what we believe will be a more favorable investment environment in 2023. We see significant opportunity to deploy capital into what promises to be great investments for our portfolio and fund investors. Now, I will turn the call over to the operator to address your questions.

Our first question comes from Glenn Schorr with Evercore ISI.

So maybe for Bill, first. Look, 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. So we had a pause for 6 or 7 months. We found Harvey. Maybe talk a little bit more about why Harvey and then, most importantly, what's he here to do relative to the strategy that all these investors are on board? And I want to know, like, is that strategy important to you and the co-founders because the process we went through is what it is? So just curious if you could talk to that.

Thank you for the question, Glenn. I am really excited that Harvey is joining us; he was our top choice for a reason. We needed someone with a solid track record, experience in building businesses, and skills in managing, recruiting, training, and developing talent in a collaborative environment. It was also important to find someone who could connect with people on Wall Street and effectively communicate our story. Harvey possesses a wide range of skills that are hard to find in one person, and I believe we have found that in him. Yesterday, we walked around our New York office, visited all the floors, and interacted with the team. They were genuinely happy to see him, which shows their excitement about his arrival rather than a desire to see me go. Many employees previously worked at Goldman and were pleased to reconnect with him, having heard of his impressive background and skills. It became clear to me that we couldn't have found anyone better than Harvey. As for his role, our direction is already set. Our primary goal is to increase the stock price, which doesn't currently reflect our strong investment track record. To achieve this, we need to grow our business, focusing on fee-related earnings and other aspects like assets. Harvey has substantial experience from his time at Goldman during a financial crisis, where he navigated risky situations with great opportunities. While I don't anticipate major changes in our basic strategy, it will ultimately be up to Harvey as the CEO. I am committed to helping him succeed, even if that means staying out of his way. I can't express how happy I am that he's here.

I have a long history with him, so I completely agree. I have a question about the numbers. I'm interested in your thoughts on the improving bid-ask dynamic. You have approximately $11 in net accrued performance revenue, which is significant in relation to your stock price. You've achieved $1 billion in performance revenue and gained another $1 billion primarily from Infrastructure and Natural Resources. Can you elaborate on the improving bid-ask dynamic? Is this something expected in the near term, or are we looking at a potential improvement in the second half? I'm curious about what you believe is needed to get things moving again.

The main issue is that sellers believe their businesses are worth what they were valued at a year or two ago, while buyers are reluctant to pay those prices. This has created a gap. I've noted that this disparity exists in equity prices and the value of companies, and it also affects credit. For instance, recently we observed that the credit spread or all-in price of credit a year ago might have been around 6% or 6.5%, and now it's in double digits. Although there are still noticeable valuation differences, the situation is gradually improving, albeit slowly. This won't be a quick fix, and there won't be a clear signal that everything is aligned. Private equity and private debt have the flexibility to adapt to various market conditions, and I can see that reflected in our current deals. We are not pursuing large transactions requiring $10 billion in equity or credit, as those would be nearly impossible now. Nonetheless, the market is healing, with buyers and sellers starting to align. Buyers are reducing their price expectations, while sellers are realizing they might need to accept lower prices than they initially anticipated. This trend is happening across the board and is likely to be more prominent in the second half of the year than in the first.

Next question comes from Bill Katz with Credit Suisse.

Congrats on adding Mr. Schwartz. So a question for you, guys. You mentioned that you think that asset gathering can be better in '23 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 free flagship corporate private equity portfolios versus the rest of the business with some emphasis on the solutions business?

Bill, it's Curt. Thanks for your question. I'll start and then Bill might add in. So 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. And between '22 and '23, it was noticeably better than what it had been in all prior years. Bill talked about some of the challenges here recently, and we think that, that's going to pick back up. The diversification across the platform and deployment I was really proud of because what you saw in '23 was much more coming out of Global Credit and other aspects of even private equity outside of corporate private equity. And so all of that was really good. So the deployment piece was really good. That leads us into a good place from a fundraising perspective and sets us up well for fundraising. And so because it's the first and foremost thing, I think, is kind of how the portfolios are performing and then how you think about fundraising. So from a fundraising standpoint, a couple of high-level things for you to keep in mind. Our portfolios are performing really well. And this, I think, sets us up nicely to go as we seek to raise more capital. Second, 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 number standpoint, I want you to keep in mind is, in 2021, at the beginning of the year, we said we would raise $130-plus billion over 4 years. So 2 years in, we've raised $80 billion, $50 billion last year, $30 billion this year. And we added $65 billion through strategic transactions. So that's $145 billion of new fee-earning AUM in just 2 years. And you see that in our fee-related earnings, up 40%, 30-plus CAGR over the last 5 years. And so that's done really well. And 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, as Bill said, I think there's less uncertainty about the global markets today than it was a year ago. Second, public markets seem to be improving here in early days of the year, but it's still early. Third, we're in '23. So that's a new set of allocations for investors. And last, 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 and taking away some uncertainty that may linger there in certain situations. But look, I'll reiterate that I think that our buyout funds will be similar in size to their previous vintages. And so I'm confident in that and very excited about kind of our overall growth in the firm. And I think that this will be a better year from a fundraising perspective than it was in 2022 and, again, helping us in our focus on driving fee-related earnings.

Okay. And just a follow-up, maybe stick with you, Curt. So just sort of triangulating the notion of FRE up in '23 over '22, just sort of wondering how you might be able to ring-fence that. And then just given the sort of yet to be determined incremental strategy with Mr. Schwartz, how should we think about margins? Because 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?

We are confident that we will grow fee-related earnings in 2023. I expect the first quarter to be somewhat flat, as I mentioned earlier, but after that, things look promising. The current environment is challenging, and we are continuing to invest, which may lead to a lower growth rate compared to the past. However, I feel optimistic about our capacity to increase fee-related earnings. With Harvey joining us, his previous experience in enhancing profitability for companies will be a valuable asset to the team and will introduce fresh perspectives. That said, I want to allow him the space to make his own mark, so I will be cautious about providing specific guidance, but we are well positioned to start 2023.

Our next question comes from Alexander Blostein with Goldman Sachs.

Maybe just to follow up the prior discussion from Bill's question. It sounds like you guys still feel pretty confident about the overall fundraising targets that you laid out a couple of 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? And 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?

Alex, it's Curt. Let me start and then Bill can add. So look, credit did about $15 billion this past year. It's going to 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 all the reasons we've talked about. But I think it's always a heavy weight in the room. And then in the solutions business, we've got our co-investment products and our secondaries products and a couple of new things that we'll bring to market this year. And so again, more products in that space. Think of the solutions business as really being a nice way to kind of really increase from where they were in 2022. And then in private equity, look, we're going to have more product in the market in private equity. So a number of buyout funds, U.S., Europe, Asia, will either begin or will be in the market from a fundraising perspective. There's other products in private equity that will be in the market. And so that, too, I think, is well positioned to do better. I don't know, Bill, if you have anything to add.

Yes. I believe that solutions will be a significant area of growth this year. I also want to be careful not to restrict Harvey’s vision or creativity regarding how things could improve. Therefore, I am hesitant to provide too much detail. However, I do believe there will be strong demand for noncorporate private equity funds. As mentioned earlier, when it becomes more challenging to raise equity, it can be easier to attract capital for credit funds due to the larger opportunities and wider spreads, which can lead to higher returns for investors. Nonetheless, I want to ensure my response does not limit Harvey's potential to excel.

Got it. All right. We'll stay tuned for when Harvey is on.

Thank you. You know Harvey? Do you know Harvey?

I have met Harvey, yes.

Okay, good. I wasn't sure if someone else from Goldman Sachs was going to share their thoughts, and I think he is a great guy.

My quick follow-up for you guys was around Fortitude. That's something you mentioned in your prepared remarks as well. And I think, Curt, you highlighted some new growth initiatives within that, that can kind of help expedite some of the growth as well. Can you expand on that a bit as well?

Sure, Alex. Fortitude has approximately $51 billion in assets under management. We have structured our service arrangement to derive fees from all of that. Additionally, they have committed about $9 billion to our funds, and everything is progressing as expected. They also possess between $3.5 billion and $4.5 billion in excess capital, allowing them to continue expanding with a very active pipeline. We believe they can double in size, and we are confident that this will happen. When we have more information on these developments, we will make sure to share it with you. Overall, we remain very optimistic about the potential benefits Fortitude can bring to Carlyle.

I want to mention that Fortitude has four or five institutional partners who are also shareholders. They have been incredible partners in helping us grow the business. Although we have a significant amount of capital invested, it's actually less than it could have been, thanks to these great partners. As Curt mentioned, we anticipate that this business will at least double in size over the next few years.

Our next question comes from Patrick Davitt with Autonomous Research.

I wanted to get a little more information on the private equity fundraising issues. Could you provide an update on the tone of the conversations with limited partners? Are you beginning to see a broader interest in private equity again? Additionally, what timeline do you anticipate for more significant closings in those large flagship funds? Considering all of this, can we agree that the fourth quarter is likely the worst it could get in that area?

Patrick, let me start on this, but I'm always sensitive about trying to read into the minds of others or really trying to figure this out in detail. Look, we have great relations with our LP investors. I think they're pleased with what we're doing. A lot of our portfolio performance has been just fantastic and well constructed. 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 2 years, I think that we can continue to do that in terms of growing and looking, we'll continue to look at organic things. So look, I think the tone is good, but it's still difficult in different places. And tone, you got to be specific related to kind of individual situations in the given fund and the like. And there's a lot of reasons to be optimistic as we start '23. So Bill, I don't know if you have anything to add to that?

No more specifics to give at this time, Curt. Sorry.

Our next question comes from Kenneth Worthington with JPMorgan.

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 pension fund community that seems more reluctant to invest further in traditional energy? And 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, I do think that we're optimistic on the energy platforms. Our partners and colleagues at NGP are excited about their opportunities. They've got a fund in the market now. I don't want to comment specifically on that, but expecting good things out of that. Our renewables platform, our power business, our international energy platform all give us a number of products, but they're not all in the market. But you're right. Right now, there's a lot of good opportunity in energy, but different LPs based on their constituencies have different perspectives. The limited experience that we have is that generally, we're seeing a nice uptick from the existing investors in existing product, which is different than kind of going after new or different, but it's a good opportunity at the present time.

And I think its returns are pretty uncorrelated with all the other returns available in the market too, and that appeals to a certain group of investors as well.

Okay. So do you think the business can grow, or will it just remain at its current level as those two trends balance each other out?

Look, the needs are really significant. I think a lot of that has played out. And so it's too early, Ken, to really call that definitively. But look, I feel a whole heck of a lot better about that whole sector than say, 2 years ago where it felt a lot more difficult. Right now, everything, performance and the chance forward on a lot of those different aspects, I think, are really, really good.

And then equity comp fell a bunch during the quarter. What drove it? And I assume we see that sort of snap back next year?

Yes. It's important to remember that evaluating any single quarter in this business can be misleading; we should look at it over a longer timeframe. The fourth quarter tends to be slightly weaker because we typically complete a large vesting in the third quarter and haven't granted anything new until February. Additionally, we had some performance units for senior employees that didn’t fully vest, which were accrued from earlier in the year. As a result, the fourth quarter was a bit light. However, I anticipate a notable increase in our equity-based compensation in 2023, as we made significant grants in February to many of our key team members to ensure retention and reward high performance, along with bringing on Harvey, which will also contribute to the rise in equity-based compensation next year.

Our next question comes from Brian McKenna with JMP Securities.

Great. So realizations have been pretty resilient despite the tough backdrop I'm curious what parts of your portfolio are you most active monetizing today? And then 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?

So Brian, it's a great question. And I always like policy my crystal ball to fine-tune this as best I can. 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. And that was like not only impossible to forecast and predict until kind of as it was happening, it also shows the power of what can occur in a single quarter. So 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. So the portfolio is incredibly well positioned to continue to drive significant realizations for our LPs and carried interest for us. Now exact timing of that, look, it's going to be second half of the year. Now good news is there's some smaller, midsized transactions occurring as we speak that gives me a lot of confidence. But the big stuff that will really drive it will be more in the back half of the year. And keep in mind, you actually sign up a transaction, and it takes often a couple of quarters to actually close the transaction. And so the level of announced transaction is far lower today than say, a year ago. And so therefore, it's going to be the back half of the year.

Helpful. And then just with respect to CP VII, gross returns of the fund total 14% or 8% on a net basis. So how are you thinking about returns for this fund as it continues to mature over time? And then if you look back historically, what's the average markup on realized investments relative to the prior unrealized marks?

I would be cautious about discussing specifics regarding our fundraising efforts on this call. However, I can share some general insights. Our current generation of buyout funds is performing similarly to their predecessors, which had strong results. I am optimistic about how this fund and others like it will continue to perform in terms of carry. We are well-positioned for success. It's important to remember that our portfolio construction across private equity, real estate, and credit is highly diversified. We focus on investing in quality assets where we have extensive industry experience and a solid understanding of the macro environment in which they operate. Most of our value creation is driven by increasing revenue and earnings. Our approach is not merely about buying low and selling high or trying to turn around a business by being smarter than others. Instead, we provide tools to enhance revenue and profitability, which leads to our success.

Our next question comes from Rufus Hone with BMO.

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. And do you think you can get to double digits organically? Or is that dependent on inorganic growth?

Thank you, Rufus. We can certainly aim for double-digit organic growth as the business is expanding rapidly, and it's possible we may achieve that in 2023, although I would characterize it as more on the lower end. The outcome is largely influenced by activity levels. Transaction fees can significantly contribute; in fact, our transaction fee revenues in 2022 surpassed 2021, marking our best year yet. However, these fees peaked in Q2 and decreased in Q3 and Q4, which has led to downward pressure on fee-related earnings. I expect this trend to persist at least into the first quarter, but as fees begin to rise again, it will provide a substantial boost. Additionally, there are several factors that we believe will start to improve later in the year. It's important to note that our credit business typically generates fees based on invested capital. As we successfully raise capital in that sector—having raised a large amount in 2022—as it is deployed, we will start to see the benefits of that. There tends to be a lag between fundraising and fee generation, especially in that business. I hope that provides some clarity.

And I would just add, Rufus, as we said during our remarks, we continue to invest in new product development and distribution. And that's across the platform and we noted that, that's in the private wealth channel as well. So 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.

Our next question comes from Craig Siegenthaler with Bank of America.

And we just want to congratulate you on naming a top-notch CEO.

Thank you.

So we wanted to start with an update on fundraising for the flagship PE funds starting with CPA. I think there are a number of large LPs that wanted to wait until 2023 when their annual deployment allocations were reset before they committed to 8. I just want to see how this is playing out now that we're more than a month into 2023?

Craig, it's really too early and I really don't like to talk about details on a given fund, but remain optimistic in terms of where all of our fundraising can turn out. And as we said, I think we're going to raise more money this year than we did last year.

Got it. And just as my follow-up. A big question for us is the long-term growth trajectory. And I know there's not a ton you can say on this, but when you wrap up your fundraising super cycle with Asia 6 and Europe 6 this year and start to exit the cycle, can you talk about the potential for FRE growth to decelerate and help us kind of with this risk really framing into '24? And I think it really comes down to the dynamic of can you raise enough capital in insurance solutions and credit to offset the net realizations that your private business will generate?

I am very optimistic. Let’s start with our solutions. Before 2021, the business averaged about $30 million in fee-related earnings for five years. After a successful fundraising effort, this business saw significant growth, initially doubling to $80 million. In 2022, we recorded fee-related earnings of around $70 million. I expect it to double again. While it may not double in 2023, I believe it can achieve that in 2024. We are very confident in the potential of our credit business, which we aim to drive for further growth. Although it may take time, we believe we can make notable progress here. This comes alongside the continuous development of our capital markets business, where I currently have no exposure to problematic deals. I am proud of our team in capital markets for their smart operations. We’ve discussed Fortitude and its capabilities, along with the strength of our structured credit offerings and new products. Don’t overlook our opportunistic credit business, which is performing well. There are many positive developments in credit and private equity. I continue to see opportunities beyond traditional buyouts, which I believe is among the best in our portfolio. With some positive developments in certain areas, we expect to return to our usual performance levels and are well-positioned for significant progress. Real estate also has an excellent track record and can contribute to our growth. It’s premature to predict outcomes in energy, but there is potential for upside in infrastructure. Though it will take time, I see good opportunities there. Overall, there are many promising aspects across our platform, and I look forward to what our team can achieve together in the future.

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 raised closed-end funds. But if you look at the number of significantly large funds across our platform in every different business, we're going to raise significant amounts of capital in every year. And 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. And we see opportunities to raise a lot of capital, which gives us conviction and confidence that we're going to be able to grow FRE in a very substantial way over time. And just to reiterate what we said during our prepared remarks, we've grown FRE at 34% CAGR over the past 5 years, and that's not an accident. It's because of this process. And as we look forward, we're very hopeful, and we have a lot of confidence that we're going to be able to deliver great results too.

Our next question comes from Michael Cyprys from Morgan Stanley.

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? 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, reimbursement 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 we're observing anything particularly significant in either direction during our meetings with people. The situation remains largely unchanged, particularly regarding access to co-investment and similar matters. That's where most of our conversations focus as we engage with LPs and work on fundraising.

And maybe just a 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 is the portfolio adapting to the sort of backdrop? And if you're able to quantify any of that, that would be helpful, too.

The portfolio experienced significant growth in the first half of the year, especially. Although the growth rate slowed in the second half, it remained positive. For the year 2022, EBITDA was growing, on average, about 10%, particularly within the Corporate Private Equity portfolio. I am optimistic about the potential for continued growth. Many of our businesses demonstrated ongoing pricing power, which supported this growth despite inflationary pressures. The positive news is that our portfolio construction has positioned us well overall. Our cash-flowing businesses in real estate are not exposed to poor-performing segments like office, hotel, or retail. Therefore, we have a solid structure across both our private equity and real estate investments.

Our next question comes from Gerry O'Hara with Jefferies.

We've covered a fair amount of ground here this morning. But maybe just kind of touching base on the expense side and 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. But perhaps, Curt, if you could give us a little sense of how to think about that as we look to the next 12 to 24 months?

Thank you for the question, Gerry, and it’s great to hear from you. In a year where I can increase FRE by 40% compared to last year, I’m happy to achieve that in any way. If that involves investing in the business, it’s a positive outcome for achieving a 40% FRE margin. Regarding cash and G&A, when you compare Q4 year-over-year, it's fairly stable. Yes, it's up on an annual basis, but we are very focused on managing costs and deciding where to allocate our excess spending. We are particularly concentrating on investing in new product development, distribution, and future growth initiatives. We are making investments that will benefit us in 2024, 2025, and 2026 to support long-term growth, especially in areas like retail and private wealth, which are important for our future, even if they have less impact on the 2023 FRE.

Our next question comes from Brian Bedell, Deutsche Bank.

Most of my questions have been asked and answered. However, I want to revisit the Investor Day targets you set in 2021. You're currently ahead of those targets, except for FRE, which seems to be on track towards the 40% target for 2024. I'm curious about your confidence in reaching that level or if it will depend more on decisions related to potential new investments, as you mentioned focusing on FRE growth.

Brian, that's a great question. I am very proud of what Carlyle and the entire team have accomplished in 2021 and 2022. We set a target of $1.6 billion for 2024, which includes $800 million from FRE and $800 million from carry for that total of $1.6 billion in pretax fees. We've already made significant progress towards that target in 2021 and 2022. Our FRE reached $834 million this past year, representing a 40% increase. My priority is the growth in FRE dollars rather than focusing solely on margins. Margins serve as a means to generate FRE dollars, and I will pursue every avenue to maximize our dollar growth. We targeted a 40% FRE margin by 2024. For 2023, I expect it will be relatively flat compared to 2022, which may put pressure on us to reach that margin in 2024. However, I believe we can achieve it. We improved from 33% to 37% from 2021 to 2022, so there's no reason we can't continue that trend into 2023 and 2024, but time will tell. The focus remains on increasing FRE dollars, and I am committed to ensuring that happens.

That's clear. One last question: you mentioned fundraising and the challenges in private equity. Can you share what you are hearing from LPs and other investors regarding Harvey joining the team and whether that boosts confidence in the franchise? Or was the issue more about industry-wide challenges rather than your leadership?

This is Bill. In my conversations with investors during my time in Europe, Asia, and Japan, I found that there weren't any investors who chose not to invest because I was the Interim CEO and we didn't have a permanent CEO at that time. Some investors may have delayed their decisions, wanting to know who the new CEO would be before committing. However, I cannot identify any investors who explicitly stated they refrained from investing due to the lack of a permanent CEO. It seems more likely that the absence of a CEO led to delays rather than outright refusals, and we’ll see how things progress once the CEO is appointed. I believe that the market conditions are a much more significant consideration than the CEO situation. Most fund investors prioritize the performance of their fund and the quality of individual deals over the identity of the CEO. While I am very enthusiastic about Harvey and believe he will excel in his role, I think the market dynamics are a more critical aspect affecting growth in private equity fundraising.

Our next question comes from Adam Beatty with UBS.

Just one question. It's got 3 parts about the fundraising environment, not necessarily fund specific, but just kind of what you're seeing. Number one, you mentioned LP liquidity needs. So 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 kind of getting past that? And 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?

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. So everyone just take that caveat very seriously as I attempt to address some of this. LP liquidity needs in general were really due to the fact that a number of funds invested and deployed capital very quickly across the industry and have come back for greater needs faster than expectations. And then with the slowing down of the equity capital markets in particular, just as we're talking about buyout in general, 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, there were 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. But again, it comes back to each individual investor type and how they're viewing it. And so I think that, that will play out. And also, again, all investors are going to 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. And then the new year, yes, that has an impact on, again, certain LPs in their allocations and how they work with their own investment committees. And yes, it is an impact for some. But again, in terms of quantifying on a broader basis, really tough to kind of do. So I don't know if Bill is going to add anything?

Well, I would say, I can't break it down by category in terms of what the impact is going to be. I think it's going to be better than it was last year. I do think that the LP liquidity creates an opportunity for Carlyle. We have a big solutions business of about $70 billion. And both in secondaries, primaries, co-investment, I think there's going to 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.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Daniel Harris for ready for 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.