Good day and welcome to the Carlyle Group's Fourth Quarter 2023 Earnings Call. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, this call is being recorded. I would like to hand the call over to Daniel Harris, Head of Public Investor Relations. You may begin.

Thank you, operator. Good morning and welcome to Carlyle’s fourth quarter and full year 2023 earnings call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz and our Chief Financial Officer, John Redett. Earlier this morning, we issued a press release in a detailed earnings presentation, which is also available on our Investor Relations website. This call is being webcast and a replay will be available. 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 provide a reconciliation of these measures to GAAP and our earnings release to the extent reasonably available. Any forward-looking statements made today do not guarantee future performance and undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties including those identified in the risk factor section of our annual report on Form 10-K that could cause actual results to differ materially from those indicated. Carlyle assumes no obligation to update any forward-looking statements at any time. 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. In our earnings presentation this quarter, you'll find several additional pages in the front of the release, starting with Page 6 that Harvey and John will refer to during our remarks. As I mentioned, you could find the presentation on our IR website to follow along. 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. Our firm finished 2023 with significant momentum. We set several records last year which you see on Page 6. They include: record FRE at $859 million; record Q4 FRE margin of 43%, and we finished the year with record AUM at $426 billion. We also raised $17 billion of capital in the fourth quarter, our third largest fundraising quarter in the history of the firm. We want to thank our investing clients for the trust they put in us as their fiduciary and the entire Carlyle team for their hard work. Again, we finished the year with significant momentum, which sets us up for success in 2024. Now, please turn to Page 7 in the document. In today's discussion, John and I are going to focus on four key areas. First, enhancing stakeholder alignment and changes we plan to make to our compensation model. Second, optimizing capital and our approach to returning capital to shareholders. Third, strategic initiatives in 2024. And lastly, we will delineate explicit financial targets for 2024. Now turning to Page 8, enhancing stakeholder alignment. Today, we're announcing a shift in our compensation strategy explicitly designed to enhance alignment across all of our stakeholders, our investing clients, our employees, and you, our shareholders. Carlyle has a performance-driven culture and our senior investing professionals want their compensation more tightly tied to performance. Shareholders also get more of what they value most: a significant step up in steady, recurring fee-related earnings, and FRE margin. Our investing clients also benefit from our teams having more skin in the game. It is a win-win-win for each of our stakeholders: our investing clients, our senior employees, and our shareholders. Second, I'd like to discuss changes to our capital allocation strategy. Please turn to Slide 9. We've increased our share repurchase capacity by an incremental $1 billion for a total of $1.4 billion. Given our strong balance sheet and positive outlook, this incremental capacity provides us flexibility to return excess capital to shareholders. At the share price, our board and senior leadership see tremendous value in the enterprise, and the opportunity to return capital to shareholders is quite compelling. John will walk through our thinking about capital management and our approach in more detail. Now moving to Page 10, I want to touch on several strategic initiatives. Global Credit insurance is positioned for strong growth. Global Credit is now our largest segment with almost $190 billion of AUM. We have driven a nearly 300% increase in credit AUM over the past four years. In Insurance, we added $29 billion of AUM in 2023 from Fortitude, including the Lincoln financial transaction. We have strong momentum coming into 2024 and a deep pipeline of growth opportunities. In Investment Solutions, we also have great operating momentum. We've grown AUM 70% over the past four years to $77 billion. Our secondaries and co-investment strategies are producing attractive returns for their investors and are well positioned to capture opportunities in the current environment. Global Investment Solutions should see FRE shift sharply higher in 2024 as the effect of strong fundraising impacts our results. We've also made progress growing our wealth strategy. The Carlyle brand is a unique and powerful asset. Since inception, we raised nearly $50 billion of wealth assets. We are incredibly appreciative of the trust that our wealth management partners have placed in us on behalf of their clients. We look forward to continuing to work with them as we grow this business together. We're excited to have our credit interval fund CTAC and RP secondary fund CAPM in the market today. And we will have a PE product in the market in the next several quarters. Now switching to expense management. While we focus on growth, we're also keeping a careful eye on expenses. In 2023, we grew headcount as we continued to invest across our platform. At the same time, we delivered expense savings in other areas. Again, while growth remains our key area of focus, executing our strategy in a disciplined manner will allow us to expand margins at the same time. Before I get to John, turning to Page 11, let me give you a quick preview of our 2024 financial targets. We are targeting FRE of $1.1 billion. We are targeting FRE margins to increase to a range of 40% to 50%. We are targeting inflows to exceed $40 billion in 2024. And again, we have significantly increased our ability to return capital to shareholders by expanding the share buyback capacity. Again, we intend to be active buyers of our stock as we see strong value returning capital to you, our shareholders. We began 2024 with clear momentum. And with that, let me now turn the call over to John.

Thanks, Harvey. Good morning, everyone. I want to cover several topics this morning and echo a few comments already made. First, stakeholder alignment and changes to our compensation strategy. Second, capital allocation. Third, I want to provide some comments on our 2023 results. And lastly, our 2024 financial targets. Updates to our compensation strategy were driven by our desire to create an even better stakeholder alignment and drive fee-related earnings to our shareholders. Essentially, compensation for our senior people will become more success-based. As a result, our earnings mix will increasingly shift to a more shareholder-friendly fee-related earnings model as our compensation changes phase in over the next few years. This should show up in two main ways. If you want to follow along, flip to Page 8. Our FRE-related cash compensation ratio will decline to 30% to 35% from 45% to 50%. Our realized performance revenue compensation ratio will increase to 60% to 70% from 45% to 50%. I want to be clear, this is not about changing the overall level of compensation, but rather having a higher portion of compensation being success-driven. This change should be neutral to DE over time. In connection with these changes, we incurred a one-time non-cash GAAP charge of $1.1 billion, largely related to the value of future carry going to employees. This will allow us to generate higher FRE for shareholders more quickly. Even after this charge, our net accrued carry balance ended the year at $2.4 billion and continued to represent over $6 per share in future earnings for our shareholders. In addition, we awarded performance stock units to a select number of senior professionals that have the accountability to help us achieve our growth objectives. These units are highly aligned with shareholders as they only vest with significant share price appreciation. As Harvey mentioned, we now have the capacity to buy back $1.4 billion in stock. This is in addition to an expected annual dividend to shareholders of over $500 million. Our strong balance sheet provides us the flexibility to both return meaningful capital to shareholders and importantly, invest for growth. These are not mutually exclusive decisions. Investing in our businesses remains our top priority. Moving on, let me highlight just a few year-end results. We generated $1.4 billion in DE or $3.24 per share, our third-best year on record. We produced $531 million in net realized performance revenues despite a difficult market backdrop. Turning to fee-related earnings, we produced a record $254 million of FRE in the fourth quarter with an FRE margin of 43%, also a record. For the year, we produced a record $859 million in FRE. As we already noted, we expect a meaningful shift higher in 2024 for both FRE and margin. Finally, as Harvey mentioned, we had a strong finish to the year in terms of fundraising, bringing in $37 billion in 2023, more than 20% higher than the prior year. Included in that total is more than $9 billion in new capital raised by Global Credit in the fourth quarter alone. We have significant momentum going into 2024. We expect FRE to be approximately $1.1 billion, more than 25% higher than 2023. We expect our FRE margin to increase to 40% to 50%, and lastly, we expect inflows to be more than $40 billion. In closing, we produced record results in 2023, and we finished the year with strong momentum. Now let me turn the call over to the operator so we can take your questions.

Thank you. Our first question comes from Alexander Blostein with Goldman Sachs. Your line is open.

Hi, good morning, Harvey. Good morning, everybody. Thanks for the question.

Yeah, hi.

I appreciate all the strategic changes you are making today. That's great. The more explicit disclosure is also very helpful. I was hoping we could start the discussion on the momentum you mentioned in your prepared remarks. As you look into 2024, particularly regarding fundraising, I know you mentioned over $40 billion. Could you walk us through that? Additionally, as you consider the momentum in the business, how does that influence the timing of the share repurchase announcement you made today? Thank you.

Thank you, Alex. As a new CEO in 2023, I focused on connecting with my teams and our investing clients. I met with over 300 investing clients throughout the year and spent significant time internally to help my teams get to know me. This was crucial for fostering the right environment. In the third quarter, I mentioned that we could feel the momentum building in terms of focus, execution, and brand receptivity. This culminated in record results, including record FRE, margins, and successful cost-saving initiatives, alongside positive fundraising outcomes. Looking ahead to 2024, the momentum feels strong despite a complex market backdrop, and I'm cautiously optimistic about the environment that could provide a tailwind and potentially exceed our targets. Regarding fundraising, while you may focus on quarterly figures, we prioritize providing the best value to our LPs. We've structured our goals for the year with awareness of our priorities, and we feel confident about our projections.

In response to your question about the buyback, we've dedicated considerable time to evaluating our capital allocation strategy. We plan to adopt a more disciplined approach moving forward. The $1.4 billion buyback is a significant initial step, and we believe the stock does not currently reflect the true value of our franchise. Therefore, we will actively buy back our shares. It's also essential to note that our strong balance sheet provides us with the flexibility to return capital to our shareholders through the $1.4 billion stock buyback and our dividend, while still allowing us to invest in our business for future growth.

Great. Thank you very much.

Thanks, Alex.

Thank you. Our next question comes from Ken Worthington with JPMorgan. Your line is open.

Hi, good morning. Thanks for taking the question. As we look at credit, fundraising was elevated at $9 billion. It looks like 50% more than you raised in the first three quarters of the year combined, and you gave some color in the deck on CLOs and CTAC, but it feels like there's more to these numbers. So can you flesh out the jump in fundraising this quarter in credit and sort of how that should continue into this year?

Yeah. Yeah. Thanks for the question. I would say, look, I think it's really tough to look at fundraising kind of quarter-to-quarter. There's obviously going to be a lot of volatility. We had a great, great fundraising fourth quarter. We actually had a great year for fundraising and credit as well. And I expect importantly that, that momentum in credit fundraising will continue well into 2024. We've got good visibility on that. It was really, really spread across all of our products that we're raising money for CLOs, as you mentioned, CTAC, which is our retail credit products always in the market. CCOP, we raised money for it as well and Carlyle Strategic Solutions, which is our kind of asset-backed fund. So it's pretty consistent across the platform. I think the important takeaway is not focusing quarter-to-quarter. We had a good year but we have really good momentum going into 2024 for credit fundraising and quite frankly, fundraising more broadly.

Great. Thank you.

Thanks, Ken.

Thanks, Ken.

Thank you. Our next question comes from Patrick Davitt with Autonomous Research. Your line is open.

Hi, good morning, everyone.

Hi, Patrick.

You mentioned the compensation framework will phase in. So what are you assuming for 2024 in your $1.1 billion guide? And in that vein, what are you assuming for transactions and FRPR? And if realizations do remain subdued, do you have a commitment from employees to these compensation ratios? In other words, will you have to abandon these targets if the realizations don't get better? Thank you.

So, it's one of the reasons when we were going through our remarks in the prepared pages, we put out a range. Look, this is super important. We're going to execute on this compensation change very deliberately. The range really gives us the flexibility to execute on this deliberately. Look, we have no idea what the market backdrop will look like. But look, I think you should walk away from this thinking our intent is for this to be DE neutral. The vast majority of our employees will not be impacted. There will be some variability in compensation for our senior folks in year-to-year. But if you look at it over a couple of year period, our intent is for compensation to not be up or not be down, and that's how we'll manage it. I think it's also important to point out, and I mentioned that in my remarks, the senior people that will have some variability in their compensation, we did grant them performance stock units. So we really have great alignment with our senior people. These performance stock units are really shareholder friendly. They only vest upon share price appreciation. And quite frankly, I think everyone here, and on the call hopes they actually do vest because they're very shareholder friendly instruments. In terms of the 2024, $1.1 billion FRE target, you look at the 25% step-up from our 859 FRE in 2023, we feel very good about it. It really is three components. It’s growth, which we’re very focused on. Two, it’s the compensation change and third, we will continue to manage the business prudently in terms of expenses. We have no intention of cutting to the bone, but we will manage the business prudently, but it is a growth, prudent expense management, and compensation changes.

Thank you. Our next question comes from Chris Kotowski with Oppenheimer & Company. Your line is open.

Yeah. Can you hear me?

Yeah, hey, Chris. Good morning.

Good morning. I would like to know more about your $40 billion fundraising target, specifically regarding the composition of that target. Even if you can't provide exact numbers, could you share what we might expect this year related to the two major flagship funds in Europe and Asia that you are raising?

Yeah. So I think you should think about it broadly across the platform. We have a lot of momentum, as you saw coming off the record fundraising in the activity in the fourth quarter. But you should expect to see really good fundraising activity in credit across the private equity platform, our real estate business, our private equity business across infrastructure, the whole space. So we built this model up across the entire franchise. I think in private equity, like the rest of the industry, specifically, I'm talking about the narrow definition of private equity, corporate private equity. I think there'll still be headwinds in the industry for that. But across our platform, we feel good about the $40 billion number. I will emphasize with John again, we report these numbers quarterly. We just don't think about fundraising. We don't run the business for a quarter but we feel good about the momentum in the business, really good about it.

In the solutions business, we have a few funds in the market, and we're experiencing strong momentum in solutions alongside private equity and credit.

Okay, great. I'm curious about the $1.4 billion share buyback authorization. Is that intended as a one-year authorization, or is it more flexible? When you combine the $1.4 billion with the dividend, it actually accounts for a significant portion of your projected distribution at the end of the year.

Yeah. So again, the way John framed this, and let's just take a step back. I think many of you have known me for years in terms of how I think around the discipline of capital. But just taking a step back, when we think about capital, we think about growth and shareholder alignment and returning capital to shareholders and investing in growth. And we think about this really purely through the lens of really where is the marginal ROI. So the first thing that's most important about this is investing in growth and we have capital available for that. This allocation to share repurchase reflects the fact that when we look at the enterprise value of our firm, it's quite compelling to return capital to shareholders. So we haven't narrowed this to one year for sure, but what we want to do is give ourselves the full range of flexibility. We're going to be very disciplined, very systematic about this in terms of driving growth, returning capital to shareholders, and finding the balance, effectively the efficient frontier of where that exists. And that's how we're thinking about it. But it's not a one year because, as you implied, in addition to the dividend, which is $500 million this year, that’s how we’re thinking about it. But again, as John said earlier, you should expect to see us be active buying stock back.

Okay, great. That’s it for me. Thank you.

Thank you. Our next question comes from Brian McKenna with Citizens JMP. Your line is open.

Hi, Brian.

Hey, Harvey, I know you're deemphasizing performance income a bit just with the comp changes this morning. But I'm curious, how are you thinking about the rebuild of net accrued performance revenues over time? After a 20% apples-to-apples year-over-year decline in 2023 on the heels of solid realizations? And specifically, kind of that rebuild as it relates to the contribution from some of the more recent flagship private equity strategies?

Yeah, Brian, it's John. I wouldn't say we're de-emphasizing performance revenue or carry realization. It's still a very core component of our business, and we expect it to remain so going forward. You're right that less of that is going to shareholders and more is going to employees, while shareholders are receiving more high-margin fee earnings due to this compensation reset. As I mentioned earlier, we still have net accrued carry of about $2.4 billion, which translates to $6 a share. I believe it still represents a significant percentage of our share price.

Got it. Thank you.

Thank you. Our next question comes from Brian Bedell with Deutsche Bank. Your line is open.

Hi, great. Good morning, folks. Thanks for taking my question. And congrats on the comp change and FRE. Maybe just to talk about the FRE margin the range not comp range, but the actual margin target range of 40% to 50%. I guess, sort of what is at both ends of that, what would be the key variabilities? Because it's a little bit wide for this year. And then in line with that, as we sort of march through '24 and getting to '25 and '26 longer term, is the intent to show or to build on the FRE margin each year and have a sort of a longer-term more steady growth profile to that? And if you can comment on the contribution from Capital Markets business. I know Harvey, you've been working on building that up. And it looks like you reported very good your transaction fee results just this fourth quarter as well.

So let me take a step back a little bit and just tell you how we're thinking about it as a leadership team. First of all, thanks for noting the capital markets momentum, pretty muted environment actually for capital markets. The team really came together and embraced the focus. And we think that will carry through into 2024 for sure. In terms of the compensation model change and the range, one of the reasons why John is only out of that range is, first and foremost, for us, it's about talent. It's about attracting and retaining the best talent. We have an extraordinary team here. And we want to make sure that as we introduce this, we actually have the flexibility to make sure that we do this methodically, patiently, and over time. So you'll see us move within this range, and you'll see periods of outperformance and periods where basically this access will shop. But fundamentally, our management will be focused on making sure that our team is paid for their performance first and foremost. That’s the most critical thing, because that will deliver for everyone in the long run, it will deliver for investing clients and that will deliver for our shareholders. But that's how we designed the model.

Thank you.

Take the next question, operator. I don't think we can hear you. Who's up? Operator, we’re ready for the next question.

Our next question comes from Ben Budish with Barclays. Your line is open.

Hi, good morning. Thanks for taking the question. Harvey, in the deck, you identified Investment Solutions as one of your strategic initiatives. And I'm just curious, typically, we see sort of your two major funds kind of go and raise flagships around the same time. And so we see like very large pickup in AUM, followed by maybe a period of flatter AUM growth. You indicated that we should see a sharp upswing in 2024 in terms of FRE. But just curious, given that you identified that as a strategic initiative, how might that cadence change in 2025 and 2026? Does this mean potentially more vehicles or more sort of run-of-the-mill fundraising? What should we expect to see there? Thank you.

In 2024, I want to emphasize that I have been actively involved since last year, benefiting from some outstanding franchise businesses and top talent. One notable area is our secondary business, which has seen significant growth this year. As mentioned in our prepared remarks, we anticipate a doubling of FRE. This team is exceptionally skilled and has significant momentum. We are continuing to develop aspects of this business, including a financing component. Recently, we launched CAPM, which I believe presents a great opportunity for wealth clients as it offers a diversified portfolio with consistent performance. You can expect us to grow this business responsibly. In the past, it may not have received as much attention, but we have a strong team energized for success.

Understood. Thank you.

Thank you. Our next question comes from Brennan Hawken with UBS. Your line is open.

Good morning. Thanks for taking my questions.

Hey, Brennan. How are you?

I’m good, Harvey. I hope you’re doing well. So understanding you guys have touched on this a little bit, but I'm hoping maybe we could peel a little because you've made a couple of references to the comp change John indicated it was phased in over time. And Harvey, I believe you indicated that it was a function somewhat as a shock absorber. So I'm sure there's nuance and layers to it, but maybe could you help us distill a little bit, what is the phase-in going to look like over time? And even once it's fully phased is the entire range still in play allowing for the shock absorbers? Could you just help us understand the difference in between how those two will play out in the next coming years?

So what I would say, again, we're talking about incentive alignment across all our constituencies, pay for performance and really managing this process over a very long period of time. It's not for a quarter or a year. And so again, when I said stock absorber, the way I think about the compensation ratio is it will be dynamic reflecting the performance. And we want to make sure that we are investing in our talent, rewarding our talent consistently. But there will be years where there'll be lower realizations, and you may see the compensation ratio tick up a little bit. We're giving ourselves that flex. The most important thing about the financial targets we put out because I know that's new is our confidence around the margin, the $1.1 billion FRE target, and the fundraising. And of course, obviously, the announcement around our share repurchase capacity. So we feel highly confident around those numbers, but we're giving you some insight into how we think about things as a leadership team.

I think Harvey covered that. We're going to phase it in over a couple of years and will be deliberate in how we approach this. This relates to compensation, which is vital for our human capital business. You should consider it over the next few years, and frankly, the market conditions will guide us. The key point is that we aim to improve stockholder alignment without necessarily increasing or decreasing pay. Our goal is to establish a performance-based, success-oriented compensation structure, and that's what we have achieved.

Great. Thanks for taking my questions.

Thanks.

Thank you. Our next question comes from Will Katz with TD Cowen. Your line is open.

Okay. Thank you very much for taking the questions, this morning.

Hi, Bill.

Good morning, and thank you for the question. I was hoping you could elaborate on the $40 billion a bit more. I understand you covered it at a high level, but could you clarify your thoughts on the success of fund opportunities in Europe and Asia? Also, I missed the details in your prepared comments regarding how many additional shares are being issued to management and what the main return assumptions are for testing that stock. Thank you.

In terms of fundraising, we have strong momentum in secondaries and co-investment. For private equity, there is significant demand for our Japan buyout fund. We will soon launch our real estate product, which is expected to deliver excellent returns. Regarding our Asia and European buyout funds, they are likely to encounter industry challenges similar to those faced by our competitors in 2024. However, we do have a few private equity offerings in the market that should be well received and in demand. I also mentioned several multiple credit products that we are very optimistic about. Regarding the Performance Share Units, these are aimed at our senior-level professionals who are responsible for driving our growth. These professionals are integral to our success. I believe these are positive instruments for shareholders, and I think they will want these to vest. The total value is approximately $300 million, with share price appreciation targets of 20%, 40%, and 60%. If our share price does not meet these targets, the shares will not vest.

Thank you.

Thank you. Our next question comes from Daniel Fannon with Jefferies. Your line is open.

Thanks, good morning. Wanted to follow up on non-comp expense. John, I think last quarter, you mentioned $40 million in run rate savings so far with more to come. Can you talk about kind of 2024 and what those numbers might look like and/or other initiatives you have in place to also complement that FRE margin expansion in addition to the comp stuff you announced today?

Thanks, Daniel. Look, I think if you look at our fourth quarter margin of 43%, which is a record for us, I think it really shows the progress we've made. To be honest, I think we've made progress faster than I anticipated. We're just going to continue to focus on expenses. We're not done. We're just going to manage the firm prudently in terms of expenses. I still think there's some opportunity going into 2024. But look, more importantly, this isn't going to be an expense story. We're much more focused on growth. We're investing in the businesses. But I would say there's probably some additional opportunity on expenses that we'll get out in 2024, but that's not going to be the story. It's going to be more about growth.

Thank you.

Thanks, Dan.

Thank you. Our next question comes from Steven Chubak with Wolfe Research. Your line is open.

Hi, good morning.

Hey, Steven.

Hey, John. I wanted to ask on the CLO business. The originations in the liquid credit business picked up nicely in 4Q, admittedly remains fairly subdued, but the outlook in the space appears to be improving. How has the deployment landscape evolve just given the improving capital markets backdrop that you cited? And how should we think about the pickup in that business as we look out to '24?

It is an incredible franchise business for Carlyle and a market leader. During the quarter, we raised our first captive equity fund, CLO partners. This achievement stands out in what many anticipated to be a challenging market environment, highlighting the robustness of the franchise and the team's quality, backed by a 20-year history of performance. The fund raise was oversubscribed, and they completed it in just a few months, potentially making it the fastest CLO captive equity fundraise ever. I’m truly proud of their accomplishments and the momentum they have. As the market backdrop has been improving, we have started to see banks resume investments in triple As, reflecting tighter credit spreads. We feel optimistic about the business momentum and the team is exceptional.

Great. Thanks for taking my question.

Thank you. Our next question comes from Mike Brown with KBW. Your line is open.

Okay. Great. Hey, good morning. The large share buyback authorization certainly makes sense here given the valuation disconnect versus the peer group. Just wanted to ask about the potential for strategic M&A and if that could start to enter the equation a little more when you think about capital allocation? I know it hasn't been a top priority for you, Harvey, in your first year, but it seems like that could eventually become an effective lever for Carlyle to consider down the road.

Yeah. So I would say, certainly open to it, let me give you my framing. Again, many of you know me, but many of you know my family, sort of first principles approach. We see marginal opportunity that's very clear to us in growing and building on the base of the franchise, right? We have all the footings. We have a world-leading corporate private equity business, a world-leading real estate franchise, a world-leading secondaries business, and a world-leading credit growing business. I just talked about this little business. So all the footings of what we need to do, as a global private markets manager, they're all in place. And the brand, so we have a lot we can build off of, and you start to see, again, that momentum in the record results from last year and in the numbers we've given you for this year. I think, again, first principles, we would never take anything off the table. I think if the industrial logic makes sense, it's good for our investing clients, our teams, and our shareholders, we'd be open to it. And we'll certainly consider things, but we're not feeling any pressure at this stage, not with this kind of momentum.

Okay, thank you. Great color.

Thank you. Our next question comes from Michael Cyprys with Morgan Stanley. Your line is open.

Hi, good morning. Thanks for taking the question. Just wanted to ask on credit insurance. If you could just elaborate a bit on the deep pipeline of growth opportunities that you alluded to for credit and insurance. Maybe you could just update us on some of the steps that you're taking to accelerate growth there and best capture the opportunity set that you see in credit and insurance, what new products can make sense? And in any areas that could make sense to fill in with hiring?

So again, you saw really strong performance out of the credit insurance platform. John referenced the $9 billion inflows in the fourth quarter. I think that we really like our positioning here. So the capital-light model gives us a huge amount of flexibility and allows us to be able to pivot in a number of different directions. And so I feel very good about the future here. I think the pipeline potential activity really reflects the partnership we have with Fortitude and really what will be happening for the foreseeable future in the insurance sector and the opportunity to build on the Fortitude platform is quite clear. So we have a number of different steps we can take to keep growing. So the outlook over the next couple of years feels quite good.

Thanks.

Thank you. Our next question comes from Glenn Schorr with Evercore ISI. Your line is open.

Hello there.

Hey, Glenn. How are you?

All righty. Sorry, one more. I'm curious to put a finer point on the buyback versus investing conversation. So Part A is just will this result in a net reduction of shares? Or is this offsetting stock-based comp? But the bigger point I want to make is I hear you on all the growth areas, and I see the momentum. There are also a bunch of areas that you're not yet scaled in across private markets, and there's so much growth. So I'm just curious on how you balance this return of capital versus this plethora of opportunity across private markets that you could be putting money to work in?

Yeah. So again, that's why I understand, and Glenn, you've known this about me for a long time. That's why I underscore, and I think I step back and say, listen, we want to think about the approach to capital management. This gives us the flexibility to return capital to shareholders because we think the enterprise value is so compelling here. At the same time, we're not sacrificing growth. And so when we look forward over the next couple of years, we wanted this flexibility, and we will move back and forth, but we are 100% making sure we invest in growth. And we think the growth opportunities for Carlyle are pretty extraordinary, and we have the momentum. And I think you see it in the financial targets. So I would agree with you.

Net buyback, shares go down?

I believe I am not certain about what John mentioned earlier regarding around 10% of the market. I think the calculations should be quite straightforward. If we fully leverage this over the upcoming quarters, the numbers should be clear.

Thank you. There are no further questions. I'd like to turn the call back over to Daniel Harris for any closing remarks.

Thank you, operator, and thank you, everyone, for joining our call today, for your time and for your questions. Should you have any follow-ups, please give Investor Relations a call. Otherwise, we look forward to talking with you again next quarter.

Thanks, everyone.

Thanks.

Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.