By Chibuike Oguh
(Reuters) -U.S. buyout firm Carlyle Group (NASDAQ:CG) Inc said on Thursday its second-quarter distributable earnings nearly doubled following a sharp rise in asset divestments in its private equity and secondary market portfolios.
Carlyle joins peer Blackstone Group (NYSE:BX) Inc in reporting such strong results, as private equity firms take advantage of the economic recovery in the aftermath of the COVID-19 pandemic to cash out on many of their holdings for top dollar.
Carlyle's shares were up more than 6%, trading at $49.8 per share as of noon on Thursday.
The Washington-based firm said its distributable earnings, which represents the cash available for paying dividends to shareholders, rose to $395.4 million from $198.4 million a year earlier.
This resulted in an after-tax distributable earnings per share of 88 cents, which surpassed the average Wall Street analyst estimate of 60 cents, according to Refinitiv.
Carlyle said it invested $8.1 billion during the quarter in new deals, including acquiring majority stakes in life sciences company Unchained Labs for $435 million and British online fashion retailer End for an undisclosed amount. It also committed to spend $6 billion on new deals, including the acquisition of a majority stake in medical supplier Medline Industries Inc alongside Blackstone and Hellman & Friedman.
The buyout firm said it generated $8.7 billion as proceeds from asset sales, including the divestment of its minority stake in music executive Scooter Braun's Ithaca Holdings and the sale of its majority stake in healthcare provider MedRisk to CVC Capital Partners.
"Industry and macro conditions are favorable and that resulted in increased activity. We're seeing growth in private equity opportunities from disruptors and companies that want our capital to grow," Carlyle Chief Executive Kewsong Lee said in an interview.
Carlyle said its private equity and credit funds appreciated by 12% and 8%, respectively. Funds managed under its AlpInvest business, which includes secondary and co-investment vehicles, rose 12%. By contrast, Blackstone said its private equity portfolio grew 13.8% in the second quarter, while its private credit unit returned 4.8%.
Carlyle said the appreciation of its funds drove net accrued performance revenues, which represent outstanding investment profits that are yet to be cashed, to $4 billion.
"This is made possible in large part because our funds are generating attractive returns and our net accrued carry balance is at record levels," Lee said in an analyst conference call.
Under generally accepted accounting principles (GAAP), Carlyle posted a net income of $925 million, six times higher than the $146 million it reported a year earlier, driven by a jump in investment income.
Carlyle's total assets under management rose to a record $276 billion, up 6% from the prior quarter, owing to fund appreciation and strong fundraising activity. It ended the quarter with $77 billion in unspent capital and declared a quarterly dividend of 25 cents.