Earnings Call Transcript - CG Q2 2025

Daniel F. Harris, Head of Investor Relations

Thank you, Kevin. Good morning, and welcome to Carlyle's Second Quarter 2025 Earnings Call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz; and 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 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 substitute for measures prepared in accordance with generally accepted accounting principles. We have provided a 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. In order to ensure participation by all those on the call today, please limit yourself to one question and return to the queue for any additional follow-ups. With that, let me turn the call over to our Chief Executive Officer, Harvey Schwartz.

Harvey Mitchell Schwartz, CEO

Thanks, Dan. Good morning, everyone, and thank you for joining us. We delivered an exceptionally strong second quarter. Our performance marks significant progress against our strategic plan and underscores once again the momentum we have globally. We set a number of new record highs. FRE was a record $323 million, up 18% year-over-year. FRE margins for the first half were also a record 48%, and we hit record AUM of $465 billion. It's also worth noting at $886 million, this is the highest level of first half DE the firm has ever had. We also brought in $51 billion of organic inflows over the past 12 months. This is a clear sign of continued confidence from our investors and is reflective of the diversified nature of our global investment platform. Before I dive into more specifics of the quarter, I'd like to address the macro environment. As we progress through the second quarter and into the summer, sentiment has continued to pick up meaningfully. Markets are functioning quite well, and activity has accelerated. Equities are near record highs and credit spreads are also near record tight levels. Markets have responded quite well to progress by the administration on tariff negotiations and tax policy. This has reduced uncertainty and has led to accelerating M&A and deal activity. As we all know, confidence is the greatest market elixir. And with increasing confidence, we're seeing continued demand for private capital. We're investing where we have strong conviction and see relative value, while maintaining our disciplined approach to how we price risk. Across the firm, we deployed $26 billion in the first half of 2025. This is up almost 50% year-over-year. I would also like to highlight how much capital we're returning to investors. Firm-wide realized proceeds are up nearly 40% year-over-year. While the corporate private equity market broadly has faced criticism for low levels of capital return to investors, we've defied that trend. We returned almost $15 billion to investors over the last 12 months. This represented 17% of our portfolio and is 3 times the industry average. And again, this is just for the second quarter, which does include significant post-quarter activity already announced. This is a really impressive achievement for our teams and fantastic for our investors, and it highlights the strength of the portfolio and differentiates us in the marketplace as compared to other firms. And trends in performance also continue to be quite positive. Our two most recent U.S. buyout funds appreciated approximately 20% over the past 12 months. In Asia, funds 1 through 4, each ranked in the top 5% performance in their respective categories, and our fifth fund appreciated 8% this quarter alone. We've also had distinctive performance versus the market in other parts of our business, amid one of the most difficult fundraising environments for real estate in recent memory. This week, we announced the final close of our tenth U.S. fund at $9 billion. That's nearly 15% larger than the predecessor fund. This team is worth underscoring given the standout performance versus the history in a difficult real estate investment backdrop. This marks the largest U.S. real estate fund raised across the industry in the past 18 months, a real reflection of the performance excellence of our team and the power of our global brand. Over on Global Credit, we hit key milestones across multiple parts of the platform. In asset-based finance, a key area of growth for Carlyle, we see lots of momentum. This quarter, we announced the first of its kind collaboration with Citigroup in the fintech specialty lending space. We also entered into a new strategic origination partnership, bringing us to 6 platform partnerships that collectively enhance our differentiated origination capabilities. Asset-based finance AUM is up 40% year-over-year and continues to scale rapidly. In our opportunistic credit business, we provided a landmark hybrid capital solution to Trucordia, a leading insurance broker. More broadly, global insurers continue to represent an improving growing client base for Carlyle. We continue to see strong demand for capital and liquidity solutions for insurers to Fortitude Re, which closed on $8 billion of reinsurance contracts in July. We also continued to be a compelling partner to third-party insurance clients globally, providing access to a range of investment opportunities, particularly as interest in private investment-grade solutions accelerates. This enables us to work with the full spectrum of insurance clients while benefiting from the growth of our partner, Fortitude Re. Moving on to Carlyle AlpInvest. The business had a record quarter with fee revenues up more than 50% and FRE nearly doubling over the past year. Secondaries continue to be a major growth engine and our latest fund currently in market is already significantly larger than the prior vintage. The secondaries co-investment portfolio finance business provides us with unique content and a committed advantage as market dynamics shift and liquidity needs evolve. Our expertise, combined with the scale of our global platform puts us in a strong position as secondaries and portfolio finance markets continue to grow. Turning to global wealth. We've seen the assets in CAPM increased sixfold over the last year. CAPM provides diversified exposure across our Carlyle AlpInvest investment strategies. There are a number of reasons advisers and investors have interest in this solution, including the speed of deployment, liquidity, diversification benefits and of course, a long history of outstanding investment performance. This is an extraordinary solution for our wealth clients. Last month, we launched a partnership with UBS, where we are the only private equity secondary solution for their international wealth clients. We're thrilled to partner with them and the early response has been fantastic. UBS is one of the leading global wealth management platforms, and we expect this partnership to be a strong driver of growth. In aggregate, we now have almost $30 billion AUM of perpetual evergreen strategies, up nearly 40% year-over-year. Lastly, we continue to gain momentum in our capital markets business, another important strategic initiative for the firm. Over the last 12 months, we generated over $230 million in capital markets fees, and we see further upside to this level as M&A and IPO market activity increases. To wrap things up, we've seen tremendous growth and momentum over the last year. As we look ahead to our next phase of growth, we announced a series of leadership appointments last week, including naming John Redett, Mark Jenkins and Jeff Nedelman as Co-Presidents, and appointing Justin Plouffe as our new CFO. These appointments are a natural evolution of our business and solidify our ability to operate at scale with the focus, alignment and agility required to lead in today's environment. I look forward to partnering closely with these leaders as we execute our strategy and deliver significant value to our investors and stakeholders around the world. With that, let me turn things over to John.

John Christopher Redett, CFO

Thanks, Harvey, and good morning, everyone. As Harvey said, we had a fantastic second quarter. We delivered record FRE of $323 million, up 18% year-over-year. Year-to-date FRE totaled $634 million, up 18% with a 48% FRE margin. DE of $2.05 per share over the first 6 months was a record start for the firm. Management fees reached $590 million for the quarter and $1.1 billion year-to-date, a 7% increase. Capital markets fees were $48 million in the second quarter, $126 million year-to-date, more than double last year. Overall, year-to-date fee revenues of $1.3 billion increased 14% year-over-year. We also reported record firm-wide AUM ending the quarter at $465 billion. First half inflows totaled $28 billion, and over the last 12 months, inflows reached $51 billion, a 12% organic growth rate. We raised $2.2 billion in our evergreen funds during the quarter, bringing our AUM in this important growth area to nearly $30 billion, up more than 40% year-over-year. Both Global Credit and Carlyle AlpInvest delivered record FRE, together accounting for 55% of firm-wide FRE, up from less than 30% two years ago. This shift reflects the increasing earnings power of these businesses and the overall diversification of our earnings stream. Carlyle AlpInvest FRE reached a record $68 million for the second quarter, and year-to-date FRE of $134 million is up more than 80% driven by a 43% increase in management fees. We raised $5.1 billion of new capital in the quarter, supported by the final close of our latest co-investment fund, which is nearly 15% larger than its predecessor. We've also seen strong fundraising in our latest secondaries fund, which is already significantly larger than its predecessor, and we are still raising capital. FRE margin in AlpInvest reached 54% in the quarter, up from 49% in the second quarter of last year. Global Credit also delivered strong performance with $111 million in FRE compared to $81 million in the second quarter of last year, a 37% year-over-year increase. For the first half, FRE of $215 million increased 41% organically year-over-year with a 46% margin. Global Credit benefited from strong capital markets activity, increasing fee-related performance revenue, and 11% growth in management fees. Credit inflows remained strong with $5.5 billion raised during the quarter. This was driven by CLO issuance, asset-backed finance, and inflows into CTAC. Over the past 12 months, Global Credit inflows of $24 billion reflect continued scaling in our strategy as well as cyclical and secular tailwinds. Turning to Global Private Equity, a key highlight in the quarter was the activation of our tenth vintage U.S. real estate fund, which closed at $9 billion, nearly 15% larger than its predecessor. A great outcome amidst a challenging real estate fundraising environment. Performance in our U.S. buyout platform remains strong with CP VII and CP VIII portfolio appreciation of 3% to 4% in the quarter, and 17% to 20% over the last 12 months. We also continue to return significant capital to our investors. This quarter, realizations in StandardAero, NSM Insurance, Forgital, and Novolex drove nearly $4 billion of realized proceeds in corporate private equity. In addition, we've announced approximately $4 billion of transactions that have not yet closed. It's worth repeating what Harvey said. Over the last 12 months, we have returned almost $15 billion to investors in corporate private equity, nearly triple the industry average. Realizations across our global investment platform over the last 12 months are approaching levels not seen since 2022. Given the exceptional first half performance and momentum across the business, let me update you on our 2025 outlook. We now expect full year FRE growth of approximately 10%, up from our prior outlook of 6%, while continuing to invest in the business to drive growth. We see potential upside if markets continue to improve. We're also tracking towards full year inflows of $50 billion compared to our prior outlook of around $40 billion. Before we wrap up, I'm really excited for Justin to step into the CFO role in January. I've known Justin for a long time as we've been colleagues at Carlyle for nearly 20 years. He's an exceptional investor and business manager, and I'm excited to work with him over the next several months as we both transition into our new roles. With that, let me turn the call over to the operator for your questions.

William Raymond Katz, Analyst

Congratulations to everyone with the promotions. Wonderful to see. Just maybe pick up, John, where you left off on the guidance. Great to see the increase for sure. I was wondering maybe a two-part question, maybe part one for you and maybe part two for Harvey. For you, wondering maybe unpack the driver of the step-up of the FRE growth, how much of that is more second half versus strong first half? And then where do you see the incremental growth on sales? And then for Harvey, I know we've been speaking about this a little bit. I know your peers are laying out sort of 5-year targets. It doesn't seem like you want to do that, but it seems like you might be receptive to looking out a little more intermediate term. I'm wondering if you can maybe frame out how we should be practically or sort of initially thinking through 2026 opportunity to grow the business.

Harvey Mitchell Schwartz, CEO

Well, Bill, maybe I'll kick off. And I heard it was your birthday today. Is that right?

William Raymond Katz, Analyst

Yes, and thank you for the great results, great birthday present.

Harvey Mitchell Schwartz, CEO

That's all about you, Bill. Well, Happy Birthday. Okay, to be serious. Look, when I arrived at the firm, some of the feedback from our stakeholders is that we didn't have forward-looking metrics for people to dive into. So for the first time ever, as you know, roughly 2 years ago, we put out the annual metrics you guys have given us feedback that you'd like to see longer duration. And so we'll think through that. We want to make sure you guys have the information you can use. I don't know, you and I talked about this. I've talked about this with lots of shareholders. I'm not sure anyone in the world can predict 5 years in any business given the complexities of the world. But certainly, if there's a bit of a desire for more, we'll certainly contemplate that. I'm not committing to anything, but we'll certainly take that into consideration. But I'll turn it over to John for the second part of the question.

John Christopher Redett, CFO

The revised outlook reflects the strong momentum we have across the entire platform, and the firm is performing better than we expected. We are pleased with the year-to-date results. The momentum remains strong, and we continue to invest heavily in the franchise to drive future growth. FRE increased by 18% in the second quarter and is up 18% year-to-date, which is exceptional. This outlook shows improved momentum across the franchise. The outperformance is primarily driven by the exceptionally strong organic growth at AlpInvest, which is entirely organic. We have seen strong capital markets revenue year-to-date, with the markets being neutral—not overly strong or weak. This presents a potential growth opportunity for us going forward, and we believe there could be upside to our guidance if the markets improve. Wealth management is becoming increasingly important for the firm, and we are making significant investments in this area. Fundraising is also a major driver, and we are pleased with the momentum we have seen there. We experienced a solid couple of quarters in credit deployment, which activates our fees in that segment. We feel good about the second half of the year. The guidance is intended to provide a look at the full year of 2025 rather than managing expectations on a quarterly basis, and again, if the markets improve, we could see upside in the outlook we shared.

Harvey Mitchell Schwartz, CEO

The only thing I'd add to that, Bill, is when I travel the world, the level of engagement is as high as I've ever seen it in the first day I've been at the firm. And that obviously reflects all the great work the teams are doing on executing the strategy, but it's also part of the environment. And the last point John made, I think there's a lot of operating leverage to an improving environment. And so I think there's upside to these numbers.

Steven Joseph Chubak, Analyst

I wanted to just unpack some of the retail commentary a bit more. The momentum is quite impressive. Flows are steadily building. We also know the CPEP launch coming in the back half. So it does feel like fundraising is potentially poised to take another step function higher. What do you think is an achievable level of run-rate flows on the platform? Just when we think about the vehicles already out there in the market, some of the launches still on the come. And given that you're likely marketing CPEP right now, I just want to get a pulse on some of the initial receptivity to the product.

Harvey Mitchell Schwartz, CEO

Yes. So why don't I give you some insight into that. So when I got here, there really wasn't a systematic strategy for how we were going to engage wealth around the world, but it was very obvious the wealth trend was emerging. And I say emerging because even though it has been significant, I still remain quite committed to the view that globally, this is a trend that's going to continue for many, many years. We systematically repositioned the business, the platform with our partners. And again, this ties back to basic fundamentals. The brand has such global recognition, the partnerships that we have, we're really thrilled with our partners, as I mentioned, launching this partnership with UBS as their exclusive partner internationally. So these are world-class partners that we're working with. From time to time, people, I think suggest, okay, there's a lot of people on platforms. But there's not a lot of Carlyle on platforms with the scale we have, the brand we have, the history we have, and the ability to create solutions the way we can. John talked a bit about Carlyle AlpInvest, but that's a category killer in terms of the wealth business. It has all the characteristics and it allows us to build off that in some unique ways. So here are the fundamental components of the strategy. Three flagship funds, the third of which you mentioned, CPEP, which will be coming online in the second half of the year, all these things have a very natural flywheel effect. So we're known globally. We have a position in the marketplace. I spend a lot of my time with advisers. And advisers are quite interested in including this in their toolkit. It's not for every adviser, it shouldn't be for every adviser, but the momentum is pretty palpable. And so we'll have these 3 flagship products, and that's a lot of what we can do to work with advisers around the world to come up with unique solutions because we have all the component parts. And again, this just built on the success of the brand. The last piece I'll talk about is, obviously, everyone in the industry is enthusiastic about the potential executive order that may come out of the White House, maybe as early as today around the retirement space. I think that, again, is going to open up a space, which is long overdue. Wealthy clients have had access to the space for a long time. Firefighters, teachers all around the United States have had access to their pension plans. So I think, again, this is all going to bundle into the strategy across the board. So we're super enthusiastic about the momentum here. This is just getting started.

Alexander Blostein, Analyst

I wanted to maybe click into another area of sort of strategic priorities for the firm, which has been around Credit. Really nice results this quarter, even when you back out the catch-up fees. Maybe talk a little bit about how you view the credit business over the next couple of years? Specifically related to asset-backed finance, investment grade, private credit, the capabilities you have there. And how you expect that business to grow, not so much for the back out, but if you think about it on a multiyear basis?

Harvey Mitchell Schwartz, CEO

One notable trend in the industry that aligns well with our strengths is the convergence of insurance credit and private credit, which has evolved significantly. A few years ago, direct lending was a major focus, and it remains an essential aspect of our approach. However, the diversification within private credit asset classes is enabling our partners to achieve additional returns. As they expand, they are reallocating assets into this area due to its favorable risk-reward profile and the nature of private investment grade. This market segment is exciting because of its size and increasing capital demand, which we expect to grow further. We have adopted a strategy of forming selective partnerships, and we currently have six collaborations where we can enhance asset flow. Last year, we executed the largest transaction in Discover, showcasing our strong capabilities. I believe this market will continue to expand, presenting another opportunity for wealth generation that complements our existing offerings like CTAC. Initially, the drive for higher risk-adjusted returns sparked the interaction between insurance and private credit, and this discussion has now gained global traction. Sovereign wealth funds, institutions, pension funds, and asset-backed finance are increasingly central to investment conversations. Our collaboration with Fortitude has allowed us to build a robust franchise and extensive internal expertise. We are optimistic about our future in this space.

Benjamin Elliot Budish, Analyst

Could you elaborate on the near-term outlook for AlpInvest and the overall Solutions business? It appears that fundraising for the secondaries vehicle is progressing very well. How much potential is still left in that area? CAPM is currently in the market, and there's a new secondaries vehicle set to launch soon. In the past, there has been a rhythm of significant fundraises for co-investments and secondaries with gaps in between, but it looks like those gaps are beginning to close. Can you share your thoughts on this? I understand you mentioned earlier that you're not ready to provide long-term targets yet, but how should we consider that aspect? Is it possible for the FRE to double again at the same pace as before? How should we view the medium-term trajectory given these various factors?

John Christopher Redett, CFO

Ben, it's John. Thanks for the question. Look, I think you're right. When you kind of look back historically at AlpInvest, the growth was more of a kind of a step function. We would raise money then it would be flat for a period of time, then we'd be back in the market and raise money. And that was kind of what that business looked like for a couple of years. I think the business has really evolved. I don't really see that step-function growth going forward. I think CAPM is going to be a big driver of growth, a consistent driver of growth looking forward. I mean CAPM in the second quarter is up 6 times what it was relative to second quarter 2024. So just exceptional growth there. The funds we're raising are bigger than predecessors. I said the co-investment fund we raised; we closed in the second quarter. It's 15% bigger. The secondaries fund we're raising is going to be significantly larger than the predecessor. It already is, and we haven't finished fundraising. I think it's important to note that we continue to raise money for our latest secondaries vintage fund, and that fund is 65% committed. So obviously, we're going to be back in the market at some point in time in the near term with another secondaries fund. So I think that will even out the growth. And this UBS partnership we have on the secondary front, I think will continue to drive growth. So I look at the business, and I feel very comfortable that the business can continue to generate consistent growth. I'm not going to sit here and tell you it's going to grow at 45% every single year. I think that's quite exceptional. But I think this business has tremendous growth attributes to it, and I would fully expect it to continue to grow at a very attractive growth rate going forward.

Brian J. Mckenna, Analyst

And first off, congrats on all the momentum. So John, you've been CFO for about 2 years now. I'm assuming you've had a little bit of a different view and look at the entire business just in this position. So as you transition back to Global Private Equity, is there an opportunity to collaborate more and leverage the broader Carlyle ecosystem to drive better outcomes in that business? And really, what are your top priorities going to be once you're back in that role? And ultimately, how do you permanently accelerate growth in that segment longer term?

John Christopher Redett, CFO

Yes. Look, I think collaboration across the Carlyle platform is something that's always been very strong. I think it's a hallmark of our culture. We've always been a very collaborative culture, and that really reflects collaboration within Global Private Equity, but more importantly, between Global Private Equity, Credit, and AlpInvest. So I don't think there's much I need to change there. It's actually quite impressive looking at it today. In terms of Global Private Equity priorities, look, we've been very focused on Global Private Equity in the last several years. It's been an area where Harvey and I spent a lot of time. And I look at the progress within our corporate private equity business, and I think it's quite exceptional. We had made some changes to that business, and we've talked about it in the past. And you look at the business the way our corporate private equity business is performing in the U.S., the performance is very strong, up 3% to 4% this quarter in our U.S. corporate private equity business, up 17% to 20% in the last 12 months. So I feel very good about our U.S. private equity business. Our Asia private equity business performance is very strong. Look, performance drives realizations, and more realizations lead to carry release. And we talked about it in our remarks. We are an outlier in a good way in terms of realizations, and we've been active in the last 12 months. We've continued to be active post the second quarter. So I feel very good with how the investment teams are completely focused on performance and monetizations. And look, real estate, it's probably been one of the most challenging real estate fundraising markets that I can recall, maybe ever. And we were able to raise a real estate fund, our 10th fund that was 15% larger than the predecessor, which reflects just the caliber of the team we have in place and the performance. So I feel very good about the role I'm stepping into. I'm stepping into a business that is actually performing exceptionally well.

Harvey Mitchell Schwartz, CEO

I'll add a couple of points about the transition. First, let's consider the areas of significant growth for the firm, like credit, insurance, and our global client relationships. For instance, CPEP serves as a comprehensive representation of our work in private equity and AlpInvest. John stepping into this role is going to be incredibly valuable for us in promoting best practices and ensuring consistency in resource allocation, investment quality, and product development. It feels natural for John to lead CPEP. Over the past two years, John has had remarkable success, and while he may not say it, I certainly will. We're fortunate to have him, and I'm also very excited for Justin to take on this role. Justin has been with the firm for 20 years and brings a wealth of history and experience. Promoting from within the organization is truly advantageous as we strategize for the future. The importance of these leadership transitions and the synergies they create for our company cannot be overstated. We are thrilled that John has taken on this position and have great confidence in Justin's capabilities. This transition will be seamless for all of you.

Michael Patrick Davitt, Analyst

You highlighted the strong flagship marks, obviously returning a lot more capital, but the net IRR of CP VII is still kind of stuck at that 8%. So how should we think about the tipping point where you would feel more comfortable taking cash carry on incremental realizations from that fund? And I know you don't give specific realization numbers, but you mentioned the $4 billion in 3Q already. As you look at that, think about what could be sold before year-end, how are you feeling about the tenor of realized performance fees in 2H versus 1H? Or does the CP VII issue and/or lead times make this more of a 2026 story now?

John Christopher Redett, CFO

Yes. It's John. Look, we have been clear in previous calls. CP VII is not going to be our best fund. I think when I look at CP VII today versus 2 years ago, I think what we've done is quite extraordinary. That fund has appreciated 17%. And you look at CP VIII, CP VIII is a second quartile fund, and that fund appreciated 20% and quite frankly, already has a pretty healthy level of DPI, given that it's only 65% to 70% invested. So it's really hard for me to tell you exactly where the tipping point is for carry. But the only thing we can do really to drive carry is continue to perform, and that's what we're doing. I mean the performance in the U.S. is very strong. Performance in Asia is very strong. The first 4 funds are in the top 5%. Our Asia buyout fund returned 8% last quarter. So we're going to focus on performance, performance drives realizations. And when DPI gets to the right level, that will be the tipping point for carry. I think it's important also to look at just our accrued carry on our balance sheet at $2.9 billion. That's up 30% from last year, 30% from last year. And the 2 big drivers of that 30% increase have really been corporate private equity, a lot of it U.S.-driven, VII and VIII, and AlpInvest. AlpInvest had a big driver this quarter, which is great to see. And again, this $2.9 billion, a 30% increase from last year, that represents $8 a share. So it's a tremendous source of value for shareholders going forward.

Brian Bertram Bedell, Analyst

Congratulations on the promotions. Regarding capital markets fees, this has shown impressive growth from a strategic perspective. We've seen seven consecutive quarters of year-over-year growth. Could you comment on whether you believe the second half of the year will surpass the first half in capital markets fees, considering the current capital markets environment? Additionally, I'd like to hear your thoughts on the long-term strategy leading into 2026, particularly about the key organic growth drivers in the capital markets business and how they relate to the broader macro environment.

Harvey Mitchell Schwartz, CEO

Thanks for the question. As we discussed when I joined, there was initially no strategy regarding capital markets fees. The team has done a fantastic job in creating and implementing a strategy. A key aspect of this strategy is that we are not risking capital, which means these fees are of the highest quality in capital markets. These fees generate significant business activity, contributing to the operating leverage due to the flywheel effect based on activity levels. As we move into the second half of the year and into next year, a couple of key developments are taking place. First, this has become second nature to the business. Second, we have businesses that historically faced challenges due to outdated documentation preventing us from collecting fees. While people have been taking fees for over a decade, we're just now putting that in place, creating more organic opportunities. Additionally, as the businesses expand, the potential for fee generation increases. There are three key components driving this organic growth: First, new funds as they launch will create opportunities for fees. Second, the operating leverage from the current environment and the developing muscle memory in the business. Lastly, the growth of our platform, asset-based finance, and other initiatives across credit will serve as natural fee drivers. We previously stated that at peak activity, this was a $300 million business. Looking ahead, in the right conditions, we believe we can exceed that significantly.

John Christopher Redett, CFO

Yes. I want to emphasize what Harvey mentioned. I believe our capital markets revenue is of very high quality because we are not assuming balance sheet risk for this income stream. Additionally, it is exclusively focused on Carlyle, as we are not engaging in capital markets activities outside of Carlyle. Over the last two years, we've experienced significant growth in capital markets revenue even with relatively stable market conditions, which indicates strong potential for future growth.

Kenneth Brooks Worthington, Analyst

Just digging into wealth, your wealth products are really ramping nicely. We're seeing flows get better each quarter, great success in CAPM and CTAC and you've got new funds coming. Just remind us, can you flesh out the path forward and next steps, what's the ongoing vision here?

Harvey Mitchell Schwartz, CEO

We aim for global expansion and I believe we are well-positioned for this. Success in wealth management and retirement relies on several key factors. One of the most important is brand recognition, which is often mentioned but deserves emphasis. Our firm, established in 1987, has built a trustworthy reputation internationally, giving us a strong global presence. We have a long history in various markets, including 25 years in Japan and 30 years in Asia outside of Japan. The wealth management trend is indeed a global one, and our brand sets Carlyle apart in our ability to engage with advisors and wealthy clients worldwide. Another crucial element is the diversification of our platform. While success is possible in a monoline approach, the diverse options we offer through our platform are vital. For instance, the counter-cyclicality of our AlpInvest platform alongside traditional buyouts provides us with the flexibility to create tailored solutions for our clients. This is why I invest significant time in understanding what advisors need for their clients. Recently, I was meeting with advisors on the West Coast to clarify their requirements. We have the capability, brand presence, and global reach to meet these demands. I believe we are only at the beginning of this trend, as we continue to grow across various platforms and regions, and we are very optimistic about the future.

Glenn Paul Schorr, Analyst

I wanted to follow up on all the good growth across AlpInvest and secondaries. And my question is more on potential for performance because you're seeing great growth. The industry is raising tons of money. And I know there are narrow discounts available. And I'm just wondering, can the industry and you continue to put up good returns in the face of all the capital raised and the narrowing discounts?

John Christopher Redett, CFO

Yes, Glenn, we have discussed this before. The industry experiences both cyclical and long-term growth trends. I view the secondaries market as being significantly behind the corporate private equity sector by about 10 to 15 years. There is strong demand for this product, which is a key driver of our growth. Additionally, this industry consists of only a few large players, making it distinct from private equity. The secondary market is expanding at an impressive rate of 40% per year. While I won’t claim that AlpInvest can maintain that 40% growth rate indefinitely, I believe this industry is far from reaching maturity. The factors supporting this growth are very robust. The usage of secondaries has changed markedly over the last decade; more investors are utilizing secondaries as a liquidity tool rather than merely reacting to a lack of exits in corporate private equity. It’s becoming a consistent method for portfolio rebalancing. Therefore, I see substantial growth potential driven by these favorable trends. From a wealth management standpoint, this product stands out as one of the best. Unlike traditional private equity, it avoids the J curve and is easier to manage, offering more diversified exposure to private equity. Consequently, I am optimistic about its growth prospects going forward.

Harvey Mitchell Schwartz, CEO

I want to emphasize everything John has said. Sometimes, key strategic points can be overlooked in the industry. As John pointed out, there are only a few hyperscalers in this business, and we are one of them. Being a hyperscaler means having 25 years of experience, and we celebrated our 25th anniversary of AlpInvest in Amsterdam this year. It involves understanding market cycles, providing consistent performance, and having a reliable team. It’s often simplified to just secondaries, but it encompasses secondaries, co-investments, primary offerings on our platform, and portfolio finance. This is where we find our unique advantage. Our business is evolving into one that offers corporate finance solutions, not just secondaries. In discussions with sovereign wealth funds, CEOs, CIOs, or wealth clients, the focus is on how we can deliver the full range of our platform's capabilities. This shift over the past few years has integrated our efforts into Carlyle, enhancing the business's leverage. When I meet with a CEO or CIO, the conversation may include bidding on assets, purchasing them, rebalancing, and discussing portfolio finance solutions. Our business truly offers solutions in every aspect, and I feel confident about its importance and value to our clients, whether they are institutional or individual investors.

Michael J. Cyprys, Analyst

Just wanted to follow up on the success in the private wealth channel with the success with CAPM, CTAC, and the new private equity evergreen product to come in the second half. So just curious how you're thinking about leveraging the success across an even broader suite of products over time in the private wealth channel. So curious how you're thinking about product development, scope for partnerships to maybe create hybrid public-private products, scope for accessing the 401(k) channel. Just curious how you're thinking about this, how you're approaching this and what might we see from Carlyle over the next several years?

Harvey Mitchell Schwartz, CEO

Thank you for the question. It's something we've been focusing on a lot internally. The key element is to place the client at the forefront of our discussions. For instance, as we explore the retirement channel, we need to identify the essential needs in retirement. There's a lot of conversation about the total addressable market and the enthusiasm surrounding it, which is great and much needed. However, it's crucial that hardworking individuals have access to these tools in their retirement. We have a lot to navigate in collaboration with regulators and government officials to ensure the industry gets it right. By "getting it right," I mean we must create solutions that consistently deliver on what we've promised over extended periods. Strategically, we must evaluate where our strengths lie. We've had in-depth discussions about our secondaries business and the potential it offers in developing innovative solutions. While there are countless possibilities we could create within this platform, such as regional funds or diversifying solutions, the focus must remain on understanding the fundamental needs of our clients, whether they are wealth advisers, mass affluent individuals, or those in the retirement channel. Our goal is to develop long-term solutions that demonstrate excellent performance. While there are numerous options we could pursue, our priority is to build the right solutions, not just to create for the sake of creating.

Daniel F. Harris, Head of Investor Relations

Thank you for your time and attention this morning. Should you have any follow-up questions, feel free to reach out to Investor Relations. Otherwise, we look forward to talking to you next quarter, and have a great summer.

Operator, Operator

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.