Carlyle signals improving growth as profit beat estimates on fee strength

By Isla Binnie and Niket Nishant

NEW YORK, Aug 6 (Reuters) - Carlyle Group CG.O laid out an improving outlook for the rest of the year on Wednesday after reporting better-than-expected profit for the second quarter, helped by a pickup in fees as it grew its assets under management.

Shares rose 4.7% as the alternative asset manager's distributable earnings, or profit that can be returned to shareholders, jumped 25.6% to $431 million, or 91 cents per share. That compares with 89 cents that analysts had expected, according to estimates compiled by LSEG.

CEO Harvey Schwartz has been working on a turnaround after a few difficult years linked to an industry-wide downturn and an internal succession struggle. Now, "momentum across the whole platform feels good," he said on Wednesday.

Fee-related earnings grew 18.4% to $323.3 million in the quarter. Fund management fees rose 16% and transaction and portfolio advisory fees, which Carlyle earns from arranging capital market deals for its portfolio companies and other clients, jumped 66%.

"The quarter reinforces our view that the business, under new management, is fundamentally inflecting," TD Cowen analysts wrote in a note.

Assets under management rose 7% to $465 billion, largely thanks to growth in Carlyle AlpInvest, the unit for second-hand private equity funds that Schwartz made a priority.

CFO John Redett said Carlyle expects fee-related earnings for 2025 to grow about 10%, up from a prior view of 6% rise.

"We're also tracking towards full-year inflows of $50 billion, compared to our prior outlook of around $40 billion," he said.

Carlyle named Redett and two other longtime insiders to new roles as co-presidents last week, a step some analysts said could help reinforce investors' confidence in the company.

Private equity firms have been struggling to sell companies they acquired during a period of much lower interest rates, hampered further recently by sweeping U.S. tariffs and geopolitical uncertainty.

But Carlyle made $ 5.1 billion by managing several large exit deals in the quarter, including that of aerospace components manufacturer Forgital and NSM Insurance Group.

CEO Schwartz welcomed recent Trump administration initiatives, including the tax and spending bill and regulatory reforms.

"There's a general acceptance that the administration is acting as everybody expected at the beginning of the year, which is very pro-growth," he said.

The secondary market where AlpInvest operates has given pension funds and other private equity investors a different way to sell stakes.

Schwartz also identified wealth, global credit and insurance and capital markets among priorities when he took over in 2023.

Carlyle generated $13.4 billion of fresh capital in the three months to June 30. It deployed $14.6 billion and had $89 billion available for investment at the end of the quarter.

So far this year, its shares have jumped nearly 23% compared with an 8.6% growth in the Nasdaq composite index .IXIC.