The Carlyle Group
Carlyle Group L.P. (Form: 8-K, Received: 10/26/2016 06:33:57)



 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
 
 
 
 
FORM 8-K
 
 
 
 
 
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 26, 2016
 
 
 
 
 
The Carlyle Group L.P.
(Exact name of registrant as specified in its charter)
 
 
 
 
 

 
 
 
 
 
Delaware
 
001-35538
 
45-2832612
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
1001 Pennsylvania Avenue, NW
Washington, D.C.
 
20004-2505
(Address of Principal Executive Offices)
 
(Zip Code)
(202) 729-5626
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 






Item 2.02
Results of Operations and Financial Condition.
On October 26, 2016, The Carlyle Group L.P. issued a summary press release and a detailed earnings presentation announcing financial results for its third quarter ended September 30, 2016. The summary press release and the earnings presentation are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Report.
As provided in General Instruction B.2 of Form 8-K, the information in this Item 2.02 and Exhibits 99.1 and 99.2 incorporated in this Form 8-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall such information or Exhibits 99.1 and 99.2 be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01
Financial Statements and Exhibits.
(d)
Exhibits.
 
 
 
Exhibit No.
  
Description
 
 
99.1
  
Summary earnings press release of The Carlyle Group L.P., dated October 26, 2016.
 
 
99.2
  
Earnings presentation of The Carlyle Group L.P., dated October 26, 2016.
 
 
 







SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
THE CARLYLE GROUP L.P.
 
 
 
 
 
 
 
 
By:
 
Carlyle Group Management L.L.C.,
 
 
 
 
 
 
its general partner
 
 
 
 
Date: October 26, 2016
 
 
 
By:
 
/s/ Curtis L. Buser
 
 
 
 
Name:
 
Curtis L. Buser
 
 
 
 
Title:
 
Chief Financial Officer






EXHIBIT INDEX
 
 
 
 
Exhibit No.
  
Description
 
 
Exhibit 99.1
  
Summary earnings press release of The Carlyle Group L.P., dated October 26, 2016.
 
 
Exhibit 99.2
  
Earnings presentation of The Carlyle Group L.P., dated October 26, 2016.
 
 
 




Exhibit 99.1
CARLYLEBLUE300DPIJPGA05.JPG  

The Carlyle Group Announces Third Quarter 2016 Financial Results
Washington, DC, October 26, 2016 – Global alternative asset manager The Carlyle Group L.P. (NASDAQ: CG) today reported its unaudited results for the third quarter ended September 30, 2016 .

Carlyle Co-CEO David M. Rubenstein said, “Carlyle again delivered a strong distribution for our unitholders of $0.50 per common unit for the third quarter. We continue to generate substantial realized proceeds, with $6.6 billion in the third quarter and more than $19 billion over the last twelve months. We are also at the beginning of what should be a significant, multi-year fundraising cycle for the firm due to continued capital deployment and the strong performance of our largest fund families.”

Carlyle Co-CEO William E. Conway, Jr. said, “Many of our most significant funds around the world are performing well. Several of our latest vintage carry funds moved into an accrued carry position during the quarter, and overall Carlyle generated 3% portfolio appreciation across our carry fund platform. We are also very focused on improving the profitability and scalability of our Global Market Strategies segment with the goal of deepening and diversifying our credit platform.”

U.S. GAAP results for Q3 2016 included loss before provision for income taxes of $(50) million , and net income attributable to the common unitholders through The Carlyle Group L.P. of $1 million , or net income (loss) per common unit of $(0.02) , on a diluted basis. U.S. GAAP results for the twelve months ended September 30, 2016 included loss before provision for income taxes of $(125) million and net income attributable to The Carlyle Group L.P. of $11 million. Total balance sheet assets were $10 billion as of September 30, 2016 .

In addition to this release, Carlyle issued a full detailed presentation of its third quarter 2016 results, which can be viewed on the investor relations section of our website at ir.carlyle.com .
Distribution
The Board of Directors has declared a quarterly distribution of $0.50 per common unit to holders of record at the close of business on November 8, 2016, payable on November 16, 2016.
Conference Call
Carlyle will host a conference call at 8:30 a.m. EDT on Wednesday, October 26, 2016, to announce its third quarter 2016 financial results.
The call may be accessed by dialing +1 (800) 850-2903 (U.S.) or +1 (253) 237-1169 (international) and referencing “The Carlyle Group Financial Results Call.” The conference call will be webcast simultaneously via a link on Carlyle’s investor relations website at ir.carlyle.com and an archived replay of the webcast also will be available on the website soon after the live call.

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About The Carlyle Group
The Carlyle Group (NASDAQ: CG) is a global alternative asset manager with $169 billion of assets under management across 125 funds and 177 fund of funds vehicles as of September 30, 2016 . Carlyle’s purpose is to invest wisely and create value on behalf of its investors, many of whom are public pensions. Carlyle invests across four segments – Corporate Private Equity, Real Assets, Global Market Strategies and Investment Solutions – in Africa, Asia, Australia, Europe, the Middle East, North America and South America. Carlyle has expertise in various industries, including: aerospace, defense & government services, consumer & retail, energy, financial services, healthcare, industrial, real estate, technology & business services, telecommunications & media and transportation. The Carlyle Group employs more than 1,625 people in 35 offices across six continents.
Forward Looking Statements
This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, contingencies and other non-historical statements. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words. These statements are subject to risks, uncertainties and assumptions, including those described under the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on February 24, 2016, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in our filings with the SEC. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as required by applicable law.
This release does not constitute an offer for any Carlyle fund.
Contacts:
Public Market Investor Relations
  
Media
Daniel Harris
  
Elizabeth Gill
Phone: +1 (212) 813-4527
  
Phone: +1 (202) 729-5385
daniel.harris@carlyle.com
  
elizabeth.gill@carlyle.com
 
 
Web: www.carlyle.com
  
 
Videos: www.youtube.com/onecarlyle
  
 
Tweets: www.twitter.com/onecarlyle
  
 
Podcasts: www.carlyle.com/about-carlyle/market-commentary

Page | 2
Exhibit 99.2

CARLYLEBLUE300DPIJPGA05.JPG

For Immediate Release
October 26, 2016

The Carlyle Group Announces Third Quarter 2016 Financial Results

Declared a quarterly distribution of $0.50 per common unit for Q3 2016

$6.6 billion in realized proceeds in Q3 2016 and $19.1 billion realized over the last twelve months
$1.6 billion in equity invested in Q3 2016 and $12.5 billion invested over the last twelve months
$3.2 billion in gross new capital raised and $1.8 billion raised on a net basis after redemptions in Q3 2016 ; $14.4 billion in gross new capital raised and $8.2 billion on a net basis after redemptions over the last twelve months
U.S. GAAP net income (loss) attributable to The Carlyle Group L.P. of $1 million , or $(0.02) per common unit on a diluted basis, for Q3 2016 and $11 million over the last twelve months
$228 million of Distributable Earnings on a pre-tax basis for Q3 2016 and $ 789 million over the last twelve months; $0.66 per common unit on a post-tax basis in Q3 2016
Economic Net Income of $54 million on a pre-tax basis and $0.21 per Adjusted Unit on a post-tax basis in Q3 2016 , driven by 3% carry fund portfolio appreciation
Washington, DC – Global alternative asset manager The Carlyle Group L.P. (NASDAQ: CG) today reported its unaudited results for the third quarter ended September 30, 2016 .

Carlyle Co-CEO David M. Rubenstein said, “Carlyle again delivered a strong distribution for our unitholders of $0.50 per common unit for the third quarter. We continue to generate substantial realized proceeds, with $6.6 billion in the third quarter and more than $19 billion over the last twelve months. We are also at the beginning of what should be a significant, multi-year fundraising cycle for the firm due to continued capital deployment and the strong performance of our largest fund families.”

Carlyle Co-CEO William E. Conway, Jr. said, “Many of our most significant funds around the world are performing well. Several of our latest vintage carry funds moved into an accrued carry position during the quarter, and overall Carlyle generated 3% portfolio appreciation across our carry fund platform. We are also very focused on improving the profitability and scalability of our Global Market Strategies segment with the goal of deepening and diversifying our credit platform.”

U.S. GAAP results for Q3 2016 included loss before provision for income taxes of $(50) million , and net income attributable to the common unitholders through The Carlyle Group L.P. of $1 million , or net income (loss) per common unit of $(0.02) , on a diluted basis. U.S. GAAP results for the twelve months ended September 30, 2016 included loss

Page | 1


before provision for income taxes of $(125) million and net income attributable to The Carlyle Group L.P. of $11 million. Total balance sheet assets were $10 billion as of September 30, 2016 .

Reserve for Litigation and Contingencies
Included in our Q3 2016 general, administrative and other expenses for both our U.S. GAAP financial results and Economic Net Income is a $100 million reserve for ongoing litigation and contingencies that is excluded from Fee-Related Earnings and Distributable Earnings, as the timing of any payment remains uncertain, and therefore, it did not reduce our Q3 2016 distribution per common unit. This reserve has been allocated to our business segments in accordance with our allocation policies for overhead.

Unless specifically noted, all references to general and administrative expenses as a component of Fee-Related Earnings in this release exclude the reserve for litigation and contingencies for comparability purposes. U.S. GAAP results and Economic Net Income include the impact of the reserve for litigation and contingencies.

Transfer of Carlyle's Interest in Emerging Sovereign Group (ESG) Back to ESG Founders
During the third quarter, we reached an agreement with ESG to transfer our 55% ownership stake in ESG back to ESG's founders. This transaction is expected to close during the fourth quarter. As of the end of Q3 2016, ESG had Total AUM and Fee-Earning AUM of approximately $3.6 billion and $3.4 billion, respectively, which will no longer be part of our AUM or Fee Earning AUM upon the closing of the transaction. During Q3 2016, ESG had no material impact on our Fee-Related Earnings, and there will be no material gain or loss associated with the disposition upon the closing of the transaction.

 
Third Quarter Distribution
The Board of Directors has declared a quarterly distribution of $0.50 per common unit to holders of record at the close of business on November 8, 2016, payable on November 16, 2016.
Distribution Policy
It is Carlyle’s intention to cause Carlyle Holdings to make quarterly distributions to its partners, including The Carlyle Group L.P.’s wholly owned subsidiaries, that will enable The Carlyle Group L.P. to pay a quarterly distribution of approximately 75% of Distributable Earnings per common unit, net of taxes and amounts payable under the tax receivable agreement, for the quarter. Carlyle’s general partner may adjust the distribution for amounts determined to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its funds or to comply with applicable law or any of its financing agreements, or to provide for future cash requirements such as tax-related payments, clawback obligations and distributions to unitholders for any ensuing quarter. The amount to be distributed could also be adjusted upward in any one quarter. The declaration and payment of any distributions is at the sole discretion of Carlyle’s general partner, which may change or eliminate the distribution policy at any time.




Page | 2



Performance Metrics
Carlyle evaluates the underlying performance of its business on four key metrics: funds raised, equity invested, carry fund returns and realized proceeds for fund investors. The table below highlights the results of these metrics for Q3 2016 , year-to-date (YTD) and for the last twelve months (LTM) 1 .
During Q3 2016 , Carlyle generated $1.8 billion of net funds raised. Carlyle raised gross new capital of $3.2 billion across its fund platform, which was partially offset by gross redemptions of $0.8 billion in our hedge fund partnerships and the return of $0.6 billion in fund investor capital related to our previously announced wind down of Diversified Global Asset Management ("DGAM").
 
Net Funds Raised
 
Equity Invested
Q3
$1.8 billion
 
Q3
$1.6 billion
 
YTD:
$5.5 bn
LTM:
$8.2 bn
 
 
YTD:
$8.5 bn
LTM:
$12.5 bn
 
 
 
 
 
 
 
 
 
 
 
Realized Proceeds
 
Carry Fund Returns
Q3
$6.6 billion
 
Q3
3%
 
YTD:
$15.1 bn
LTM:
$19.1 bn
 
 
YTD:
9%
LTM:
11%
Note: Equity Invested and Realized Proceeds reflect carry funds only.
During Q3 2016 , within its carry funds, Carlyle generated realized proceeds of $6.6 billion from 137 investments across 44 carry funds. Carlyle invested $1.6 billion of equity in 143 new or follow-on investments across 26 carry funds in Q3 2016 . On an LTM basis, Carlyle realized proceeds of $19.1 billion and invested $12.5 billion .
 
 
 
 
Realized Proceeds
 
Equity Invested
 
Segment (Carry Funds Only)
 
# of Investments
 
# of Funds
 
$ millions
 
# of Investments
 
# of Funds
 
$ millions
Q3
Corporate Private Equity
 
46
 
20
 
$4,798
 
16
 
12
 
$541
Global Market Strategies
 
26
 
7
 
$157
 
10
 
5
 
$109
Real Assets
 
67
 
17
 
$1,632
 
117
 
9
 
$968
Carlyle
 
137
 
44
 
$6,587
 
143
 
26
 
$1,618
LTM
Corporate Private Equity
 
102
 
30
 
$13,463
 
59
 
18
 
$7,970
Global Market Strategies
 
49
 
8
 
$418
 
19
 
5
 
$616
Real Assets
 
166
 
23
 
$5,234
 
215
 
17
 
$3,917
Carlyle
 
314
 
61
 
$19,115
 
292
 
40
 
$12,503
Note: The columns may not sum as some investments cross segment lines, but are only counted one time for Carlyle results.







_______________________________________________________________________________________________________________________________
1 LTM, or last twelve months, refers to the period Q4 2015 through Q3 2016 . Prior LTM, or the prior rolling 12-month period, refers to the period Q4 2014 through Q3 2015 .

Page | 3




Carlyle Consolidated GAAP Results
 
Net income (loss) attributable to The Carlyle Group L.P. was $1 million for Q3 2016 , or $(0.02) per common unit on a diluted basis, compared to $(84) million for Q3 2015 , or $(1.11) per common unit on a diluted basis.

Loss before provision for income taxes (1) was $(50) million for Q3 2016 , compared to $(529) million for Q3 2015. The decrease in loss before provision for income taxes in Q3 2016 compared to Q3 2015 is primarily due to a $278 million increase in net performance fees, an increase in investment income of $80 million and a decrease in general, administrative and other expenses due to a $186 million intangible asset impairment in Q3 2015 , offset by a $100 million reserve for litigation and contingencies in Q3 2016 . The decreases in revenues from consolidated entities, expenses from consolidated entities and net investment gains (losses) of consolidated entities relate primarily to the deconsolidation of the fund of funds vehicles and hedge funds, as well as many of the CLOs, on January 1, 2016, as a result of the adoption of new U.S. GAAP consolidation guidance.

Net income (loss) attributable to The Carlyle Group L.P. was $1 million for Q3 2016 or $(0.02) per common unit on a diluted basis. The Carlyle Group L.P. has $1 million of income despite a $(22) million loss attributable to Carlyle Holdings due to a benefit for income taxes attributable solely to The Carlyle Group L.P. For purposes of the diluted earnings per unit calculation, Carlyle Holdings partnership units are assumed to have converted to common units of The Carlyle Group L.P, and therefore, substantially all of the net loss of Carlyle Holdings is attributable to The Carlyle Group L.P. resulting in a diluted loss per common unit.
The Carlyle Group L.P.
Summary U.S. GAAP Condensed Consolidated Statements of Operations (Unaudited)
 
 
Three Months Ended           
 
LTM
 
 
Sep 30, 2015
Dec 31, 2015
Mar 31, 2016
Jun 30, 2016
Sep 30,
2016
 
Sep 30,
2016
 
 
(Dollars in millions, except per unit data)
 
 
 
 
Revenues
 
 
 
 
 
 
 
 
Fund management fees
 
$
278.3

$
255.1

$
289.5

$
272.5

$
255.1

 
$
1,072.2

Total performance fees
 
(246.6
)
203.6

145.2

210.9

214.7

 
774.4

Total investment income (loss)
 
(9.5
)
8.7

(9.6
)
65.3

70.5

 
134.9

Revenue from consolidated entities
 
270.3

245.7

53.3

54.3

61.7

 
415.0

All other revenues
 
5.0

2.7

4.7

5.0

5.3

 
17.7

Total revenues
 
297.5

715.8

483.1

608.0

607.3

 
2,414.2

 
 
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
 
 
Base compensation
 
163.5

160.0

166.3

149.9

154.3

 
630.5

Equity-based compensation
 
86.8

87.0

75.4

109.0

81.4

 
352.8

Total performance fee related compensation
 
(72.9
)
95.4

69.5

96.5

110.9

 
372.3

General, administrative and other expenses
 
289.6

173.6

82.3

91.4

188.9

 
536.2

Expenses from consolidated entities
 
323.7

267.8

46.8

84.0

114.4

 
513.0

Interest and other nonoperating expenses
 
4.6

18.7

19.1

16.1

11.9

 
65.8

Total expenses
 
795.3

802.5

459.4

546.9

661.8

 
2,470.6

 
 
 
 
 
 
 
 
 
Net investment gains (losses) of consolidated funds
 
(31.3
)
(71.4
)
(8.4
)
6.7

4.8

 
(68.3
)
Income (loss) before provision for income taxes
 
(529.1
)
(158.1
)
15.3

67.8

(49.7
)
 
(124.7
)
Provision (benefit) for income taxes
 
(4.1
)
(10.3
)
7.4

24.3

1.0

 
22.4

Net income (loss)
 
(525.0
)
(147.8
)
7.9

43.5

(50.7
)
 
(147.1
)
Net income (loss) attributable to non-controlling interests in consolidated entities
 
(152.4
)
(119.6
)
(2.3
)
1.6

(29.1
)
 
(149.4
)
Net income (loss) attributable to Carlyle Holdings
 
(372.6
)
(28.2
)
10.2

41.9

(21.6
)
 
2.3

Net income (loss) attributable to non-controlling interests in Carlyle Holdings
 
(288.7
)
(23.6
)
1.8

35.8

(22.4
)
 
(8.4
)
Net income (loss) attributable to The Carlyle Group L.P.
 
$
(83.9
)
$
(4.6
)
$
8.4

$
6.1

$
0.8

 
$
10.7

 
 
 
 
 
 
 
 
 
Net income (loss) attributable to The Carlyle Group L.P. per common unit
 
 
 
 
 
 
 
 
   Basic
 
$
(1.05
)
$
(0.06
)
$
0.10

$
0.07

$
0.01

 
 
   Diluted
 
$
(1.11
)
$
(0.06
)
$
0.01

$
0.07

$
(0.02
)
 
 
 
 
 
 
 
 
 
 
 
(1) Income (loss) before provision for income taxes is the GAAP measure that is most directly comparable to Economic Net Income (ENI) and Distributable Earnings, which management uses to measure the performance of the business.  In most periods, income (loss) before provision for income taxes will be lower than ENI principally due to excluding from ENI equity compensation from awards issued in conjunction with the initial public offering, acquisitions and strategic investments, as well as other acquisition-related charges, including amortization of intangibles and impairment.  In periods of positive earnings, net income (loss) attributable to The Carlyle Group L.P. typically will be lower than ENI as net income (loss) attributable to The Carlyle Group L.P. only includes the portion of earnings (approximately 26% before taxes as of September 30, 2016) that is attributable to the public unitholders whereas the calculation of ENI reflects the adjusted earnings attributable to all unitholders.  A full reconciliation is included on page 33. See "Non-GAAP Financial Information and Other Key Terms" for additional information.


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Carlyle All Segment Results
 
Distributable Earnings (DE): $228 million for Q3 2016 and $789 million on an LTM basis
Distributable Earnings were $228 million for Q3 2016 , or $0.66 per common unit on a post-tax basis, compared to $ 244 million for Q3 2015 . DE was $789 million on an LTM basis, 27% lower than the prior LTM.
Fee-Related Earnings (FRE) were $31 million for Q3 2016 , down 46% relative to $ 57 million in Q3 2015 . Total fee revenue of $266 million was $50 million lower than Q3 2015 , largely due to a decrease in catch up management fees of $32 million in Q3 2016 . Cash compensation of $144 million, excluding equity-based compensation, was $21 million lower than in Q3 2015 , while general and administrative (G&A) expenses were $5 million lower than in Q3 2015 . FRE was $ 170 million on an LTM basis, 24% lower than the prior LTM, largely owing to a $67 million decline in catch up management fees compared to the prior LTM due to a lower level of carry fund fundraising in Q3 2016 .
Realized Net Performance Fees were $186 million for Q3 2016 , compared to $ 177 million for Q3 2015 , due to strong public market exit activity. For Q3 2016 , net realized performance fees included fees related to full or partial exits in Axalta, CommScope, Sagemcom, NXP Semiconductors, Bank of Butterfield, and Duff & Phelps, among others. Realized Net Performance Fees were $ 590 million on an LTM basis, 38% lower than the prior LTM.
Realized Investment Income was $11 million in Q3 2016 , with gains in Corporate Private Equity, Real Estate, and Natural Resources, partially offset by realized losses in other Real Assets investments, primarily Urbplan Desenvolvimento Urbano S.A. ("Urbplan").
Economic Net Income (ENI): $54 million for Q3 2016 and $373 million on an LTM basis. Excluding the impact of the reserve for litigation and contingencies of $100 million, pre-tax ENI would have been $154 million for the quarter.
Q3 2016 ENI was positively impacted by strong carry fund valuations primarily in our U.S. Buyout, Japan Buyout, Financial Services, and NGP Energy carry funds, among others. Net performance fees were $142 million compared to $ (149) million in Q3 2015 . On an LTM basis, ENI of $ 373 million was 26% lower than the prior LTM, with the decline driven by reserves for litigation and other contingencies we have taken over the LTM.
Carlyle generated ENI per Adjusted Unit of $0.21 on a post-tax basis for Q3 2016
The Carlyle Group L.P. - All Segments
 
Quarter
 
LTM
 
% Change    
$ in millions, except per unit data and where noted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2015
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
 
Q4 15 - Q3 16
 
QoQ  
 
YoY
 
LTM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
 
94
 
491
 
451
 
533
 
540
 
2,014
 
1%
 
477%
 
(12)%
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 

Expenses
 
222
 
418
 
363
 
374
 
486
 
1,641
 
30%
 
119%
 
(8)%
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 

Economic Net Income (Loss)
 
(128)
 
73
 
89
 
158
 
54
 
373
 
(66)%
 
142%
 
(26)%
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 

Fee-Related Earnings
 
57
 
43
 
51
 
45
 
31
 
170
 
(31)%
 
(46)%
 
(24)%
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 

Net Performance Fees
 
(149)
 
109
 
75
 
115
 
142
 
442
 
23%
 
196%
 
5%
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 

Realized Net Performance Fees
 
177
 
100
 
70
 
233
 
186
 
590
 
(20)%
 
5%
 
(38)%
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 

 

Distributable Earnings
 
244
 
145
 
129
 
288
 
228
 
789
 
(21)%
 
(6)%
 
(27)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

Distributable Earnings per common unit (after taxes)
 
$0.74
 
$0.38
 
$0.35
 
$0.84
 
$0.66
 
 
 
 
 

 

Distribution per common unit
 
$0.56
 
$0.29
 
$0.26
 
$0.63
 
$0.50
 
 
 
 
 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

Total Assets Under Management ($ in billions)
 
187.7
 
182.6
 
178.1
 
175.6
 
169.1
 
 
 
(4)%
 
(10)%
 
(10)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

Fee-Earning Assets Under Management ($ in billions)
 
128.1
 
131.0
 
130.3
 
125.3
 
123.8
 
 
 
(1)%
 
(3)%
 
(3)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Totals may not sum due to rounding.

Page | 5



Carry Fund Performance and Net Accrued Performance Fees
Carlyle's carry fund portfolio valuation increased 3% during Q3 2016 and 11% over the past twelve months. Carlyle's carry fund public portfolio appreciated 3% and the private portfolio appreciated 4% during Q3 2016 . Third quarter carry fund valuations were positively impacted by strength in our latest vintage U.S. Buyout, Asia Buyout, Japan Buyout, U.S. Real Estate, NGP Energy, and distressed credit carry funds, among others, while depreciation in our first energy mezzanine fund and older U.S. Real Estate funds negatively impacted valuations. NGP funds X and XI appreciated a weighted 20% during the quarter.
As of Q3 2016 , net accrued performance fees of $1.2 billion were approximately in line with Q2 2016 and were modestly lower compared to $1.3 billion at the end of Q3 2015. The decline compared to Q3 2015 is primarily due to strong exit activity in Corporate Private Equity and Real Estate funds that realized carry.
 
 
 
2014
 
2015
 
2016
 
Net Accrued
Performance Fees
Fund Valuations
($ in millions)
 
Q1
 
Q2
 
Q3
 
Q4
 
Q1
 
Q2
 
Q3
 
Q4
 
Q1
Q2
Q3
 
Q3 2016
Overall Carry Fund Appreciation/ (Depreciation) (1,2)
 
6%
 
5%
 
3%
 
1%
 
6%
 
3%
 
(4)%
 
2%
 
1%
5%
3%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Corporate Private Equity (3)
 
8%
 
5%
 
3%
 
7%
 
8%
 
5%
 
(3)%
 
3%
 
1%
4%
3%
 
$886
Buyout
 
8%
 
5%
 
3%
 
7%
 
9%
 
4%
 
(3)%
 
3%
 
1%
4%
3%
 
$850
Growth Capital
 
0%
 
13%
 
8%
 
1%
 
3%
 
11%
 
0%
 
0%
 
(2)%
3%
0%
 
$36
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real Assets (3)
 
2%
 
3%
 
2%
 
(8)%
 
2%
 
0%
 
(5)%
 
0%
 
1%
7%
4%
 
$202
Real Estate
 
2%
 
4%
 
4%
 
8%
 
11%
 
4%
 
6%
 
6%
 
8%
8%
0%
 
$223
Natural Resources (4)
 
 
 
 
 
3%
 
(8)%
 
1%
 
0%
 
(4)%
 
0%
 
(2)%
11%
12%
 
$55
Legacy Energy
 
1%
 
2%
 
0%
 
(17)%
 
(3)%
 
(3)%
 
(17)%
 
(7)%
 
(3)%
3%
1%
 
$(76)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global Market Strategies Carry Funds (3)
 
3%
 
12%
 
6%
 
(2)%
 
3%
 
2%
 
(9)%
 
(4)%
 
(12)%
(2)%
0%
 
$37
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Carry Fund / Other (5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$45
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Accrued Performance Fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$1,170
(1) Appreciation/(Depreciation) represents unrealized gain/(loss) for the period on a total return basis before fees and expenses. The percentage of return is calculated as: ending remaining investment fair market value plus net investment outflow (sales proceeds minus net purchases) minus beginning remaining investment fair market value divided by beginning remaining investment fair market value. Fund only, does not include co-investment.
(2) Carlyle’s “carry funds” refer to (i) those investment funds that we advise, including the buyout funds, growth capital funds, real estate funds, infrastructure funds, certain energy funds and opportunistic credit, distressed debt and mezzanine funds (but excluding our structured credit/other structured product funds, hedge funds, business development companies, mutual fund, and fund of funds vehicles), where we receive a special residual allocation of income, which we refer to as a carried interest, in the event that specified investment returns are achieved by the fund and (ii) those investment funds advised by NGP from which we are entitled to receive a carried interest.
(3) We generally earn performance fees (or carried interest) from our carry funds representing a 20% allocation of profits generated on third-party capital after returning the invested capital, the allocation of preferred returns of generally 8% or 9% and return of certain fund costs. Our net interest in the performance fees after allocations to our investment professionals or other parties varies based on each fund. For our Corporate Private Equity, Global Market Strategies, Real Estate and Natural Resources carry funds (excluding NGP) our net interest in performance fees is generally 55%. Our net interest in the performance fees from the NGP carry funds ranges from 40% to 47.5%. Our net interest in the performance fees from our Legacy Energy carry funds generally ranges from 16% to 40%, with a weighted average of 18.1% based on remaining fair value invested as of September 30, 2016 .
(4) Natural Resources is comprised of NGP, infrastructure, power and international energy funds.
(5) Includes structured credit/other structured product funds, hedge funds, business development companies, mutual fund and Investment Solutions vehicles.

Page | 6




Assets Under Management and Remaining Fair Value of Capital
 
Total Assets Under Management: $169.1 billion as of Q3 2016 ( -10% LTM)
Major drivers of change versus Q2 2016 : Distributions ( -$8.7 billion ) and net redemptions ( -$1.0 billion ), partially offset by market appreciation (+ $2.6 billion ), commitments, net of expired capital ( +$1.0 billion ) and foreign exchange impact ( +$0.9 billion ).
Total Dry Powder of $54.4 billion as of Q3 2016 , comprised of $20.7 billion in Corporate Private Equity, $13.4 billion in Real Assets, $6.1 billion in Global Market Strategies and $14.2 billion in Investment Solutions.
During Q3 2016 , our hedge fund partnerships and commodities vehicles returned $0.8 billion in gross redemptions to their fund investors, and we returned $0.6 billion of capital to DGAM Investors. Also during the third quarter, we agreed to transfer our 55% ownership interest in Emerging Sovereign Group back to ESG's founders. This transaction is expected to close during the fourth quarter. As of the end of Q3 2016 , our AUM includes $5.4 billion of hedge fund partnership and DGAM assets. These assets are comprised of approximately $1.0 billion that will be redeemed in future periods, $0.2 billion of DGAM assets in wind down and $3.6 billion of ESG assets that will be removed from our AUM upon the transfer of ownership to the ESG management team.

Fee-Earning Assets Under Management: $123.8 billion as of Q3 2016 ( -3% LTM)
Major drivers of change versus Q2 2016 : Net distributions and outflows ( -$3.7 billion ), net redemptions ( -$1.0 billion ), market depreciation ( -$0.7 billion ), and changes in CLO collateral balance ( -$0.3 billion ), partially offset by inflows, including fee-paying commitments ( +$3.4 billion ) and foreign exchange impact (+ $0.6 billion ).
Fee-Earning AUM was positively impacted during the third quarter by closings in our fourth distressed credit fund and AlpInvest Secondaries, and the pricing of one new CLO, partially offset by redemptions in our hedge fund partnerships and return of capital to DGAM investors.

Remaining Fair Value of Capital (carry funds only) as of Q3 2016 : $56.0 billion
Current Multiple of Invested Capital (MOIC) of remaining fair value of capital: 1.1x .
Total Fair Value derived from investments made in 2011 or earlier: 31% .
AUM in-carry ratio as of the end of Q3 2016 : 56% which is up fro m 48% in the prior quarter, as our latest vintage U.S. Buyout and Japan Buyout funds moved into an accrued carry position, and our latest vintage NGP Energy and U.S. Real Estate funds moved further into accrued carry.

AUMCHARTV2.JPG
Note: Data as of September 30, 2016 . (1) Fair value of remaining carry fund capital in the ground, by vintage. Totals may not sum due to rounding.

Page | 7




Non-GAAP Operating Results
Carlyle’s non-GAAP results for Q3 2016 are provided in the table below:
 
Carlyle Group Summary
 
$ in millions, except unit and per unit amounts
 
 
 
Economic Net Income
Q3 2016

 
Economic Net Income (pre-tax)
$
53.5

Less (Add): Provision (Benefit) for income taxes (1)
(16.2
)
 
 
Economic Net Income, After Taxes
$
69.7

 
 
Adjusted Units (in millions) (2)
330.2

 
 
Economic Net Income, After Taxes per Adjusted Unit
$
0.21

 
 
Distributable Earnings
 
 
Distributable Earnings
$
228.2

Less: Estimated foreign, state, and local taxes (3)
5.6

 
 
Distributable Earnings, After Taxes
$
222.6

 
 
Allocating Distributable Earnings for only public unitholders of The Carlyle Group L.P.
 
 
 
Distributable Earnings to The Carlyle Group L.P.
$
57.8

Less: Estimated current corporate income taxes (4)
1.4

 
 
Distributable Earnings to The Carlyle Group L.P. net of corporate income taxes
$
56.4

 
 
Units in public float (in millions) (5)
85.0

Distributable Earnings, net, per The Carlyle Group L.P. common unit outstanding
$
0.66

 
(1) Represents the implied provision for income taxes that was calculated using a similar methodology as that used in calculating the provision for income taxes for The Carlyle Group L.P., without any reduction for non-controlling interests.
(2) For information regarding our calculation of Adjusted Units, please see page 34.
(3) Represents the implied provision for current income taxes that was calculated using a similar methodology as that used in calculating the provision for current income taxes for The Carlyle Group L.P., without any reduction for non-controlling interests.
(4) Represents current corporate income taxes payable on Distributable Earnings allocated to Carlyle Holdings I GP Inc. and estimated current Tax Receivable Agreement payments owed.
(5) Includes 389,001 common units that we estimate will be issued in October and November 2016 in connection with the vesting of deferred restricted common units and an exchange of Carlyle Holdings partnership units. For purposes of this calculation, these common units have been added to the common units outstanding as of September 30, 2016 because they will participate in the unitholder distribution that will be paid in November 2016.
 

Page | 8




Corporate Private Equity (CPE)
Net Funds Raised
 
Equity Invested
 
Realized Proceeds
 
Carry Fund Returns
Q3
$0.4 billion
 
Q3
$0.5 billion
 
Q3
$4.8 billion
 
Q3
3%
YTD:
$0.8 bn
LTM:
$2.4 bn
 
YTD:
$5.2 bn
LTM:
$8.0 bn
 
YTD:
$11.2 bn
LTM:
$13.5 bn
 
YTD:
8%
LTM:
11%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Distributable Earnings (DE): $209 million for Q3 2016 and $629 million on an LTM basis, compared to $981 million for the prior LTM. The following components impacted DE in Q3 2016 :
Fee-Related Earnings (FRE) were $17 million for Q3 2016 , compared to $29 million for Q3 2015 . The decline in Q3 2016 as compared to Q3 2015 was primarily driven by a $30 million decline in fee revenues inclusive of a $21 million decrease in catch up management fees. The decrease in fee revenues was partially offset by a $12 million decrease in cash compensation expense and a $5 million reduction in G&A expenses. FRE was $ 89 million on an LTM basis, compared to $122 million for the prior LTM, with the decrease primarily driven by a decrease in catch up management fees.
Realized Net Performance Fees were $ 168 million for Q3 2016 , compared to $138 million for Q3 2015 , with the increase primarily driven by higher realized proceeds of $4.8 billion in Q3 2016 relative to $2.6 billion in Q3 2015. Carlyle Partners V, Carlyle Europe Partners III and Carlyle Global Financial Services Partners generated the majority of CPE's realized net performance fees in Q3 2016 . Realized Net Performance Fees were $492 million on an LTM basis, compared to $829 million for the prior LTM.
Realized Investment Income was $ 24 million for Q3 2016 , compared to $ 11 million for Q3 2015 . Results for Q3 2016 primarily were driven by realized gains in investments in our most recent U.S. buyout funds, Carlyle Partners V and Carlyle Partners VI. Realized Investment Income was $48 million on an LTM basis, compared to $29 million for the prior LTM.

Economic Net Income (ENI): $63 million for Q3 2016 and $ 216 million on an LTM basis, compared to $573 million for the prior LTM. The LTM decline relative to the prior LTM was largely attributable to lower appreciation in our carry funds, reserves for litigation and contingencies, modestly lower FRE and higher equity compensation.
CPE carry fund valuations increased 3% in Q3 2016 and increased 11% on an LTM basis, compared to a decrease of (3)% in Q3 2015 and an increase of 16% for the prior LTM.
Net Performance Fees were $ 101 million for Q3 2016 , compared to $ (141) million for Q3 2015 . Net Performance Fees were $241 million on an LTM basis, compared t o $488 million for t he prior LTM.

Total Assets Under Management (AUM): $ 54.6 billion as of Q3 2016 ( -13% LTM).
Funds Raised in Q3 2016 of $0.4 billion were largely attributable to the final closing in Carlyle Global Partners, our first long dated private equity fund, plus certain coinvestments.
Fee-Earning Assets Under Management of $37.8 billion were down 3% versus Q2 2016 and down 7% versus Q3 2015 . Major drivers of change versus Q2 2016 : Outflows, including distributions and basis step downs ( -$0.9 billion ) and market depreciation ( -$0.3 billion ).
 
Corporate Private Equity
 
Quarter
 
LTM
 
% Change    
$ in millions, except per unit data and where noted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2015
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
 
Q4 15 - Q3 16
 
QoQ  
 
YoY
 
LTM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income (Loss)
 
(130)
 
63
 
32
 
58
 
63
 
216
 
8%
 
148%
 
(62)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings
 
29
 
17
 
32
 
23
 
17
 
89
 
(25)%
 
(43)%
 
(27)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Performance Fees
 
(141)
 
87
 
19
 
33
 
101
 
241
 
206%
 
172%
 
(51)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized Net Performance Fees
 
138
 
62
 
68
 
195
 
168
 
492
 
(14)%
 
21%
 
(41)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings
 
178
 
81
 
105
 
235
 
209
 
629
 
(11)%
 
17%
 
(36)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets Under Management ($ in billions)
 
63.1
 
63.1
 
61.1
 
57.6
 
54.6
 
 
 
(5)%
 
(13)%
 
(13)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Earning Assets Under Management ($ in billions)
 
40.7
 
40.9
 
40.9
 
38.9
 
37.8
 
 
 
(3)%
 
(7)%
 
(7)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Totals may not sum due to rounding.

Page | 9





Global Market Strategies (GMS)
Net Funds Raised
 
Equity Invested
 
Realized Proceeds
 
Carry Fund Returns
Q3
$1.1 billion
 
Q3
$0.1 billion
 
Q3
$0.2 billion
 
Q3
—%
YTD:
$2.2 bn
LTM:
$2.8 bn
 
YTD:
$0.3 bn
LTM:
$0.6 bn
 
YTD:
$0.3 bn
LTM:
$0.4 bn
 
YTD:
(13)%
LTM:
(19)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Funds Raised excludes acquisitions, but includes hedge funds and CLOs/other structured products. Equity Invested and Realized Proceeds are for carry funds only.

Distributable Earnings (DE): $4 million for Q3 2016 and $22 million on an LTM basis, compared to $52 million for the prior LTM. The following components impacted DE in Q3 2016 :
Fee-Related Earnings (FRE) were $(5) million for Q3 2016 , compared to $6 million for Q3 2015 . The decline was driven by an $8 million decrease in fee revenue and an increase in professional and legal fees within G&A, partially offset by lower cash compensation. FRE was $(2) million on an LTM basis, compared to $26 million for the prior LTM. We expect GMS will operate at a loss in the near term primarily due to continuing losses in our hedge fund and associated commodities products, as well as investments we are making to grow our credit business.
Realized Net Performance Fees were $ 8 million for Q3 2016 , compared to $6 million for Q3 2015 . Realized Net Performance Fees were $22 million on an LTM basis, compared to $18 million for the prior LTM.
Realized Investment Income was $ 1 million for Q3 2016 , compared to $ 3 million in Q3 2015 . Realized Investment Income was $2 million on an LTM basis, compared to $8 million for the prior LTM.

Economic Net Income (Loss) (ENI): $(11) million for Q3 2016 and $(26) million on an LTM basis, compare d to $(6) million for the prior LTM, with the LTM decline primarily due to reserves for litigation and contingencies we have taken over the LTM and lower FRE.
GMS carry fund valuations were flat in Q3 2016 and depreciated 19% on an LTM basis, as compared to 9% depreciation in Q3 2015 , with lower marks in our first energy mezzanine fund partially offset by appreciation in our distressed debt funds. The Q3 2016 asset-weighted hedge fund performance of our reported funds was 0.7% .
Net Performance Fees of $ 10 million for Q3 2016 , compared to $ (27) million for Q3 2015 . Net Performance Fees were $10 million on an LTM basis, compared to $(8) million for the prior LTM.

Total Assets Under Management (AUM) : $ 34.1 billion as of Q3 2016 ( -4% LTM).
Fee-Earning AUM of $ 29.0 billion was generally in line with Q2 2016 and declined 2% versus Q3 2015 .
GMS carry fund AUM ended Q3 2016 at $8.2 billion , up from $7.4 billion in Q2 2016. During the quarter, we had a first closing in Carlyle Structured Credit and follow on closings in our Asia Structured Credit and fourth Distressed Credit fund.
Total structured credit AUM ended Q3 2016 at $19.0 billion , down from $19.9 billion in Q2 2016.
Total hedge fund AUM ended Q3 2016 at $5.2 billion , versus $5.8 billion at Q2 2016 and $9.3 billion at Q3 2015 . During Q3 2016 , our hedge fund partnerships returned $0.8 billion in gross redemptions to fund investors. Also during Q3 2016 , we reached an agreement to transfer our ownership stake in ESG back to ESG's founders. Upon the closing of that transaction, which is expected to occur in Q4 2016, our Total AUM and Fee-Earning AUM will decline by approximately $3.6 billion and $3.4 billion, respectively. Over the next several quarters, our remaining hedge fund partnerships expect to return approximately $1.0 billion in additional redemptions to fund investors.
Global Market Strategies
 
Quarter
 
LTM
 
% Change    
$ in millions, except per unit data and where noted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2015
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
 
Q4 15 - Q3 16
 
QoQ  
 
YoY
 
LTM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income (Loss)
 
(28)
 
(22)
 
(6)
 
12
 
(11)
 
(26)
 
(190)%
 
62%
 
(361)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings
 
6
 
3
 
(1)
 
1
 
(5)
 
(2)
 
(525)%
 
(186)%
 
(106)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Performance Fees
 
(27)
 
(6)
 
2
 
5
 
10
 
10
 
111%
 
135%
 
229%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized Net Performance Fees
 
6
 
8
 
1
 
5
 
8
 
22
 
64%
 
20%
 
21%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings
 
15
 
11
 
1
 
7
 
4
 
22
 
(45)%
 
(76)%
 
(57)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets Under Management ($ in billions)
 
35.5
 
35.3
 
34.0
 
34.7
 
34.1
 
 
 
(2)%
 
(4)%
 
(4)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Earning Assets Under Management ($ in billions)
 
29.5
 
31.0
 
28.6
 
28.7
 
29.0
 
 
 
1%
 
(2)%
 
(2)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 

Funds Raised, excluding hedge funds ($ in billions)
 
1.5
 
1.6
 
1.0
 
2.1
 
1.5
 
6.1
 

 

 

Hedge Fund Net Inflows ($ in billions)
 
(0.7)
 
(0.9)
 
(1.5)
 
(0.5)
 
(0.4)
 
(3.3)
 

 

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Totals may not sum due to rounding.


Page | 10




Real Assets
Net Funds Raised
 
Equity Invested
 
Realized Proceeds
 
Carry Fund Returns
Q3
$0.2 billion
 
Q3
$1.0 billion
 
Q3
$1.6 billion
 
Q3
4%
YTD:
$0.9 bn
LTM:
$1.2 bn
 
YTD:
$2.9 bn
LTM:
$3.9 bn
 
YTD:
$3.6 bn
LTM:
$5.2 bn
 
YTD:
13%
LTM:
13%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note: Funds Raised excludes acquisitions. Equity Invested and Realized Proceeds are for carry funds only.

Distributable Earnings (DE): $ 10 million for Q3 2016 and $ 120 million on an LTM basis, compared to $113 million for the prior LTM, excluding the impact of the Q1 2015 French tax judgment of $(80) million. The following components impacted DE in Q3 2016 .
Fee-Related Earnings (FRE) were $14 million for Q3 2016 , compared to $20 million for Q3 2015 . The decrease in Q3 2016 FRE is due to a decline in catch up management fees of $13 million as compared to Q3 2015, partially offset by a decline of $4 million in cash compensation and a $1 million decline in G&A expenses. FRE was $67 million on an LTM basis, compared to $60 million for the prior LTM.
Realized Net Performance Fees were $ 11 million for Q3 2016 , compared to $32 million for Q3 2015 . The decrease in Q3 2016 is primarily due to elevated net realized performance fees from our first power fund in Q3 2015 that did not recur this quarter. Realized Net Performance Fees were $73 million on an LTM basis, compared to $97 million for the prior LTM.
Realized Investment Income (Loss) was $ (14) million for Q3 2016 , compared to $(5) million for Q3 2015 . The loss in Q3 2016 is attributable to elevated realized losses in Urbplan, partially offset by gains in Real Estate and Natural Resources investments. Realized investment (loss) was $(20) million on an LTM basis, compared to $(44) million for the prior LTM, excluding the impact of the Q1 2015 French tax judgment.

Economic Net Income (Loss) (ENI): $ 4 million for Q3 2016 and $ 183 million on an LTM basis, compared to $(47) million for the prior LTM, excluding the impact of the Q1 2015 French tax judgment. The LTM increase in ENI relative to the prior LTM was largely attributable to higher appreciation in our Natural Resources and Real Estate carry funds, partially offset by reserves for litigation and contingencies taken over the LTM.
Real Assets carry fund valuations appreciated 4% in Q3 2016 , compared to 5% depreciation in Q3 2015 .
Net Performance Fees were $ 28 million for Q3 2016 , compared to $16 million for Q3 2015 . Net performance fees were positively impacted by strength in U.S. Real Estate funds VI and VII and NGP carry funds. Net Performance Fees were $182 million on an LTM basis, compared to $(72) million for the prior LTM. The latest vintage NGP Energy and U.S. Real Estate funds moved further into accrued carry during Q3 2016 .

Total Assets Under Management (AUM): $35.7 billion for Q3 2016 ( -11% LTM).
Funds Raised in Q3 2016 of $0.2 billion were driven by a follow on closing in our new Core Plus real estate fund.
Fee-Earning Assets Under Management of $28.9 billion in Q3 2016 declined by 5% versus Q2 2016 and increased 1% versus Q3 2015 . Major drivers of change versus Q2 2016 : Outflows, including distributions ( -$1.6 billion ), partially offset by inflows, including fee-paying commitments (+ $0.2 billion ).
Real Assets
 
Quarter
 
LTM
 
% Change
$ in millions, except per unit data and where noted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2015
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
 
Q4 15 - Q3 16
 
QoQ  
 
YoY
 
LTM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income (1)
 
26
 
39
 
62
 
79
 
4
 
183
 
(95)%
 
(85)%
 
487%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings
 
20
 
22
 
16
 
15
 
14
 
67
 
(7)%
 
(29)%
 
12%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Performance Fees
 
16
 
26
 
54
 
74
 
28
 
182
 
(62)%
 
80%
 
353%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized Net Performance Fees
 
32
 
28
 
1
 
34
 
11
 
73
 
(69)%
 
(67)%
 
(25)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings (1)
 
47
 
51
 
20
 
39
 
10
 
120
 
(74)%
 
(78)%
 
6%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets Under Management ($ in billions)
 
40.2
 
38.0
 
36.7
 
37.5
 
35.7
 
 
 
(5)%
 
(11)%
 
(11)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Earning Assets Under Management ($ in billions)
 
28.5
 
30.9
 
30.7
 
30.4
 
28.9
 
 
 
(5)%
 
1%
 
1%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) The YoY comparison excludes the impact of the Q1 2015 French tax judgment on Economic Net Income and Distributable Earnings.
Note: Totals may not sum due to rounding.



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Investment Solutions

Distributable Earnings (DE): $ 6 million for Q3 2016 and $19 million on an LTM basis, compared t o $22 million fo r the prior LTM.
Fee-Related Earnings (FRE) were $ 5 million for Q3 2016 , compared to $3 million for Q3 2015 . During Q1 2016, we restructured the Investment Solutions segment and commenced the wind down of our fund of hedge funds and liquid alternatives platforms. This restructuring continued to have a positive impact on results during Q3 2016 . The increase in Q3 2016 FRE was largely attributable to lower cash compensation and lower G&A expenses, partially offset by modestly lower management fees. FRE was $16 million on an LTM basis, compared to $14 million for the prior LTM.
Realized Net Performance Fees were $ 1 million for Q3 2016 , in line with $1 million for Q3 2015 . Realized Net Performance Fees were $3 million on an LTM basis, compared to $8 million for the prior LTM.

Economic Net Income (Loss) (ENI) was $ (3) million for Q3 2016 and $0 on an LTM basis, compared to $19 million for the prior LTM. The LTM decline relative to the prior LTM was largely attributable to reserves for litigation and contingencies taken over the LTM.
Net Performance Fees were $ 3 million for Q3 2016 , compared to $ 4 million in Q3 2015 . Net Performance Fees were $ 10 million on an LTM basis, compared to $13 million for the prior LTM.

Total Assets Under Management (AUM) of $44.7 billion in Q3 2016 were 2% lower compared to Q2 2016 and 9% lower than Q3 2015 . Major drivers of change versus Q2 2016 : Distributions ( -$2.2 billion ) and net redemptions ( -$0.6 billion ), partially offset by market appreciation (+ $0.9 billion ), commitments (+ $0.5 billion ) and foreign exchange impact (+ $0.5 billion ).
Funds raised during Q3 2016 include a follow-on closing for AlpInvest's sixth Secondaries fund and several separately managed accounts.
During Q3 2016 , we returned $0.6 billion in capital to DGAM investors, and over the next several quarters, we expect to return the remaining $0.2 billion in AUM.

Fee-Earning Assets Under Management of $28.1 billion in Q3 2016 was 3% higher than Q2 2016 and was 4% lower than Q3 2015 . Major drivers of change versus Q2 2016 : Outflows, including distributions and basis step downs ( -$1.1 billion ) and net redemptions ( -$0.6 billion ), partially offset by inflows, including fee-paying commitments ( +$2.4 billion ) and the impact of foreign exchange ( +$0.3 billion ).

Investment Solutions
 
Quarter
 
LTM
 
% Change
$ in millions, except per unit data and where noted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Q3 2015
 
Q4 2015
 
Q1 2016
 
Q2 2016
 
Q3 2016
 
Q4 15 - Q3 16
 
QoQ  
 
YoY
 
LTM
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Economic Net Income (Loss)
 
4
 
(7)
 
0
 
9
 
(3)
 
0
 
(127)%
 
(163)%
 
(101)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fee-Related Earnings
 
3
 
1
 
3
 
6
 
5
 
16
 
(18)%
 
104%
 
8%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Performance Fees
 
4
 
2
 
0