By Chibuike Oguh
(Reuters) - Carlyle Group (NASDAQ:CG) Inc said on Thursday its fourth-quarter distributable earnings increased almost fourfold thanks to a record level of asset sales from its private equity portfolio that was partly offset by rising compensation expenses.
The Washington, D.C.-based firm said its distributable earnings rose to a record $903 million in the fourth quarter, up from $237 million a year earlier. That resulted in an after-tax distributable earnings per share of $2.01, which outperformed the average Wall Street analysts estimate of $1.21 per share, according to financial data provider Refinitiv.
Carlyle cashed out a record $15.3 billion worth of its investments during the quarter and spent $14 billion on new acquisitions, taking advantage of a favorable economic environment, Chief Executive Kewsong Lee said in an interview.
Mergers and acquisitions activity reached an all-time high in 2021, as cheap capital because of low interest rates, pent-up demand from the COVID-19 pandemic, and buoyant public markets allowed private equity firms such as Carlyle to strike deals and sell investments for top dollar.
"The record realizations is driven because of incredibly strong investment performance and investment work over the years. When you create fundamental value and drive growth at our companies, you're going to benefit from strong realizations and exit activity," Lee said.
Carlyle's earnings are in line with the results of peer Blackstone (NYSE:BX), whose distributable earnings also rose to a record high in the fourth quarter.
For its quarterly fund performance, Carlyle said its private equity portfolio appreciated by 6%, credit funds rose 1%, and assets managed under its secondaries franchise gained 7%. By comparison, Blackstone's private equity funds grew by 4.8%, while its credit arm posted a net return of 3.1% in the same period.
Carlyle paid out $244 million as cash-based compensation and benefits during the quarter, up 21% from the $202 million spent last year, reflecting the cost of additional hiring in its investment teams and increased payment of so-called carried interest to executives.
"It's all about creating the right culture. It's all about pay for performance. We had a record year and we care about alignment," Lee said.
Carlyle's total assets under management rose 3% during the quarter to $301 billion, driven by strong fundraising particularly in its credit business that was partially offset by the record asset sales. It ended the quarter with $84 billion of unspent capital and declared a dividend of 25 cents per share.