Carlyle unconcerned by AlpInvest fee earnings drop

The Q4 year-on-year drop from $7m to $1m is due to the run-off of legacy assets and several large fundraisings having yet to come to market, said co-CEO Glenn Youngkin.

A drop-off in fee-related earnings at AlpInvest Partners is no cause for concern, the co-chief executives of its parent group have said.

The Carlyle Group‘s Investment Solutions business accrued $1 million in fee-related earnings in the fourth quarter, down from $7 million in the same quarter of 2018, according to the listed private equity firm’s results announcement. Fee-related earnings for full-year 2019 were $17 million, down from $34 million the year before.

The Investment Solutions business comprises AlpInvest’s primary, secondaries, co-investment and mezzanine funds, as well as real estate secondaries group Metropolitan Real Estate Equity Management. Combined, it accounts for more than $63 billion of invested capital.

“We didn’t buy their historical carry when we acquired AlpInvest,” said the New York investment manager’s co-CEO Glenn Youngkin on the firm’s fourth quarter earnings call on Wednesday.

“Those funds are European-style waterfalls, so you will expect to see more of that come to Carlyle over time. Secondly, I expect to see fee-related earnings increase in 2020, especially considering the fundraising campaigns that are in place.”

Co-CEO Kewsong Lee added: “Some of the AUM we acquired has been running off; it doesn’t really have a lot of fees with it. But the big picture evolution has been the growth of secondaries and co-investments… We’ve seen extraordinary growth and this plays to the strengths of our private equity and real estate activities within the solutions group.”

In November, sister publication Secondaries Investor revealed that AlpInvest was returning to market with its seventh secondaries programme targeting $8 billion. It is also in the process of investing its seventh co-investment vehicle, which raised €2.5 billion, according to the results announcement.

Carlyle acquired Amsterdam-headquartered AlpInvest in 2011 from Dutch pensions APG and PGGM.

Carlyle’s assets under management hit $224 billion at the end of the quarter, up 4 percent year-on-year, of which $86 billion is in its corporate private equity arm. The firm invested $2 billion through its corporate private equity funds in the quarter and $8.2 billion for the full year. The platform saw realised proceeds of $1.9 billion in Q4.