Carlyle Group Inc. (CG) FY 2022 MD&A

ITEM 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS      OF OPERATIONS

Unless the context suggests otherwise, references in this report to “Carlyle,” the “Company,” “we,” “us” and “our” refer to The Carlyle Group Inc. and its consolidated subsidiaries. The following discussion should be read in conjunction with the consolidated financial statements and the related notes included in this Annual Report on Form 10-K.

Overview

We conduct our operations through three operating segments: Global Private Equity, Global Credit, and Global Investment Solutions.

•Global Private Equity — Our Global Private Equity segment advises our buyout and middle market and growth capital funds, our U.S. and internationally focused real estate funds, our infrastructure and natural resources funds. We also include the NGP Carry Funds in this segment, which are managed and advised by NGP. As of December 31, 2022, our Global Private Equity segment had $163.1 billion in AUM and $107.8 billion in Fee-earning AUM.

•Global Credit — Our Global Credit segment advises products that pursue investment strategies including loans and structured credit, direct lending, opportunistic credit, aircraft finance, infrastructure debt, insurance solutions and global capital markets. As of December 31, 2022, our Global Credit segment had $146.3 billion in AUM and $121.2 billion in Fee-earning AUM.

•Global Investment Solutions — Our Global Investment Solutions segment advises global private equity programs and related co-investment and secondary activities. As of December 31, 2022, our Global Investment Solutions segment had $63.3 billion in AUM and $37.5 billion in Fee-earning AUM.

We earn management fees pursuant to contractual arrangements with the investment funds that we manage and fees for transaction advisory and oversight services provided to portfolio companies of these funds. We also typically receive a performance fee from an investment fund, which may be either an incentive fee or a special residual allocation of income, which we refer to as a performance allocation, or carried interest, in the event that specified investment returns are achieved by the fund. Under U.S. generally accepted accounting principles (“U.S. GAAP”), we are required to consolidate some of the investment funds that we advise. However, for segment reporting purposes, we present revenues and expenses on a basis that deconsolidates these investment funds. Accordingly, our segment revenues primarily consist of fund management fees and related transaction and portfolio advisory fees and other income, realized performance revenues (consisting of incentive fees and performance allocations), realized principal investment income, including realized gains on our investments in our funds and other trading securities, as well as interest income. Our segment expenses primarily consist of cash compensation and benefits expenses, including salaries, bonuses, and realized performance payment arrangements, and general and administrative expenses. While our segment expenses include depreciation and interest expense, our segment expenses exclude acquisition and disposition related charges and amortization of intangibles and impairment. Refer to Note 17 to the consolidated financial statements included in this Annual Report on Form 10-K for more information on the differences between our financial results reported pursuant to U.S. GAAP and our financial results for segment reporting purposes.

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Trends Affecting our Business

The year 2022 was characterized by high inflation, significant market volatility, rapidly tightening financial conditions, a surge in the U.S. dollar against most currencies, and weakening fundamentals across the globe. By the end of 2022, U.S. consumption, investment and manufacturing all showed signs of slowing growth. While fourth quarter 2022 U.S. GDP growth surprised to the upside at a 2.9% quarter-over-quarter annualized rate, expanding inventories and declining imports accounted for nearly 70% of the headline growth. Experiences and services spending stood out as bright spots as the year progressed, with hotel stays and domestic air travel rising above pre-pandemic averages as consumers shifted spending habits away from the pandemic-driven durable goods boom of 2020 and 2021. Residential construction activity and investment declined rapidly in the latter half of 2022 due to a rapid increase in average mortgage rates and related collapse in home construction and purchasing activity. After peaking at 9.1% in June 2022, consumer prices rose 6.5% in December 2022 from a year earlier; core prices, which exclude food and energy, rose 5.7% in December, a decline from a September peak of 6.3%. Faster than expected deceleration in inflation readings has increased market optimism over the past month that the Federal Reserve will not raise interest rates to as high a level as previously anticipated. However, the dramatic increase in financing costs over the past year for many companies could result in reduced spending, hiring, and capital expenditures over the next several months, introducing risks to the near-term economic outlook.

Europe’s GDP growth in 2022 surprised to the upside, with current estimates anticipating greater than 3% growth for the year. Price cap schemes, generous fiscal subsidies, and a mild winter all contributed to a smaller-than-expected impact of the energy crisis resulting from the Russia-Ukraine conflict. After surging over the summer to oil price equivalents in excess of $1,000 per barrel, forward wholesale electricity prices have moderated back towards levels seen at the end of 2021 in response to policy actions by the European Commission. Household consumption and consumer confidence have remained resilient as a result, with our portfolio data indicating steady improvement in spending patterns throughout the fourth quarter of 2022. Going forward, the industrial sector remains most vulnerable to the ongoing energy crisis. Industrial production costs have increased by 40% over the year and more than 200% for certain gas-intensive industrial processes. Beyond energy, certain economies with very high household debt levels, such as the United Kingdom and Sweden, also face rising risks as mortgage rates reset and depress disposable income.

While Europe’s energy subsidies have softened the blow of the ongoing energy crisis to domestic consumers and businesses, the effect is to bid away already scarce natural gas from other net energy importers, many of which are emerging market economies that cannot compete on price. The IMF forecasts that there will be between 20 and 30 sovereign defaults in 2023 and 2024 and that 1.7 billion people are at risk of food insecurity. The triple threat of expensive and scarce energy supplies and food shortages pose a significant challenge to many emerging market economies around the globe, which in turn increases the risk of political and social unrest.

For much of Asia, 2022 was a year of below-trend growth due to high prices, particularly for food and fuel, slowing global demand for goods, and spillover effects from slower growth in China. In Japan, lingering COVID-19 related restrictions, wages that lagged broader inflation, and volatile industrial output hindered growth, and overall GDP remains below pre-pandemic peaks in real terms. In Korea, economic growth slowed throughout the year as export demand fell and high prices sapped consumer confidence. India was a bright spot in 2022, with robust growth in domestic consumption and fixed investment. China’s economy was flat in the fourth quarter of 2022 compared to the third quarter, a better-than-expected outcome given disruption experienced as a result of the rapid rollback in COVID-19 restrictions and subsequent surge in cases. Overall, China’s economy, hampered by rolling COVID-19 related restrictions and broad lockdowns, grew 3% in 2022, well below its long-term trend. However, the recent rapid rollback of COVID-19 related restrictions has introduced significant optimism that growth will rebound strongly in 2023. Preliminary data on foot traffic in our portfolio retail locations and cargo throughput volumes indicate an acceleration in activity in January 2023. While China’s growth outlook has improved, the relationship between China and the U.S. remains strained, and tensions between China and Taiwan continue to mount, raising risks of further global economic volatility given the connection between the China and U.S. economies.

Revenues for S&P 500 constituents are estimated to have grown 10.5% in 2022, a reflection of companies’ ability to push through higher prices. This topline growth momentum did slow throughout the year; however, for Q4 2022, revenues are estimated to have grown just 4% vs. year-ago levels. Estimates of S&P 500 constituents’ earnings growth for 2022 were steadily marked down throughout the year, and currently stand at 4.4% in 2022. Notably, estimates anticipate that earnings contracted by 5.0% in Q4 2022 versus the same period a year ago, the worst decline since Q3 2020 during the midst of the pandemic. Seven of eleven sectors estimate year-over-year earnings declines in the fourth quarter of 2022, led by materials, consumer discretionary, and communication services. The estimated blended net profit margin is 11.4% for Q4 2022, down from 12.4% a year ago, as earnings growth lagged topline growth in 2022. The productivity gains that companies enjoyed in 2020 and 2021 on the back of large investments in digitization and technology faded in 2022; instead, a persistently tight labor market, faster wage gains, and higher input prices slowed real output growth.

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Equity markets experienced significant volatility throughout 2022 as developed markets saw the highest rates of inflation in 40+ years, monetary policy shifted rapidly from accommodative to hawkish, and geopolitical developments introduced new growth fears. The Federal Reserve raised the federal funds rate by a cumulative total of 450 bps since March 2022, and has indicated that more hikes are forthcoming, albeit at a somewhat slower pace. Futures markets have been volatile in 2023, but currently price in an additional 50 bps in rate increases by June 2023. The Dow Jones, S&P 500, and Nasdaq 100 fell 8.8%, 19.4 %, and 33%, respectively, from December 31, 2021 to December 30, 2022. Globally, the MSCI ACWI, EuroStoxx 600 and Shanghai Composite fell 19.8%, 12.9%, and 15.1%, respectively, over the same period.

Obtaining financing in both the high yield bond market and the leveraged loan market is currently challenging. In 2022, global bond funds experienced over $375 billion in outflows. Financing has become increasingly expensive due to both the rise in base rates (SOFR rose 425 bps over the course of the year) and wider spreads (B-rated option-adjusted spreads rose 265 bps from December 2021 to December 2022). Leveraged loans, which are floating rate and thus typically more appealing to investors when interest rates are rising, have sold off to a lesser extent, but financing and transaction volumes have been under pressure. U.S. leveraged loan issuance fell 55% in 2022 versus 2021, while global M&A volumes totaled $3.8 trillion in 2022, a 36% decline from 2021. IPO proceeds, which boomed in 2021, fell 69% globally and 93% in the U.S. market in 2022, where IPOs raised just $24 billion, the lowest amount since 1990. As capital markets activity slows, we may experience a corresponding reduction in the capital markets fees we earn in connection with activities related to the underwriting, issuance and placement of debt and equity securities. Our announced new investment and realization activity has been slower, and we therefore expect a slow start to 2023 for both deployments and realizations. As a result, we expect that transaction fee revenue, realized performance fee revenue and realized investment income will likely be lower over the next quarter or two. Our activity could increase as we move throughout the year as industry levels improve over the coming months.

Our carry fund portfolio continued to reflect the impact of the broader macroeconomic environment in the fourth quarter. Within our Global Private Equity segment, our corporate private equity funds appreciated 1% in the fourth quarter and 6% for the year, and our real estate funds depreciated 1% during the fourth quarter but appreciated 16% for the year. Our natural resources and infrastructure funds appreciated by 2% in the fourth quarter and 48% for the year. In our Global Credit segment, our carry funds (which represent approximately 11% of the total Global Credit remaining fair value) appreciated 2% in the fourth quarter and 3% for the year. Global Investment Solutions funds depreciated 3% in the fourth quarter but appreciated 6% for the year; however excluding the impact of foreign currency translation of the USD-denominated investments in our EUR-based funds, Global Investment Solutions would have been flat in the fourth quarter, and experienced 4% appreciation for the year. The valuations of our primary and secondary funds of funds generally reflect investment fair values on a one-quarter lag.

Our non-carry fund Global Credit products continue to perform well. Dividend yields on our business development companies as of December 31, 2022 were approximately 10%, and approximately 10% for our retail credit product (CTAC). In our liquid credit strategy, our global CLO portfolio continues to experience a default rate less than the industry average, and we are actively managing our credit positions to maintain balanced risk-adjusted credit quality. While default rates have remained low, we expect to see them increase in 2023 as inflation, higher financing costs and the threat of global recession continue to pressure borrower debt-service capacity.

We generated $8.6 billion in realized proceeds from our carry funds in the fourth quarter and $33.8 billion for the year; however, we expect that as market conditions remain challenging, the pace of realizations will slow in the near term. Our net accrued performance revenues on our balance sheet remained high at $4.0 billion at December 31, 2022, up 2% since December 31, 2021.

During the fourth quarter, our carry funds invested $6.8 billion in new or follow-on transactions and we invested a record $34.8 billion for the full year 2022. Deal activity in private equity has retreated to pre-pandemic levels from the record level pace in 2021, and while we continue to see a pipeline of smaller transactions that require less debt at closing, we believe that larger deals will be slower to occur. However, as the environment for traditional credit issuance remains challenging, we expect that demand for private credit will remain robust, resulting in the potential for strong deployment in our Global Credit segment.

During 2022, we raised $29.9 billion in new capital, which included $2.0 billion in additional third-party capital raised for our strategic investment in Fortitude, fundraising on our CLO platform and in CTAC, and the launch of our third Credit Opportunities fund within our Global Credit segment, as well as fundraising for our Global Private Equity and Global Investment Solutions funds. We anticipate the fundraising landscape to continue to be competitive as limited partners are closely managing their portfolio allocation targets in light of market volatility and their liquidity requirements. As a result, fundraising in certain products - particularly in corporate private equity strategies - may take longer to complete and fund sizes may not meet levels that they otherwise would in a more favorable market environment. Slowdowns in fundraising may also

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delay catch-up management fees that would be charged to fund investors in subsequent closings and smaller fund sizes could result in lower management fees in the future.

The SEC has put forth several rule proposals in recent months, and we are continuing to evaluate the potential impacts to our business and operations and those of our portfolio companies. These proposals include, among others: (i) new reporting requirements of material cybersecurity incidents and periodic reporting regarding a company’s cybersecurity risk programs, (ii) new rules and amendments under the Investment Advisers Act of 1940 that expand compliance obligations and prohibit certain activities for private fund advisors, and (iii) extensive climate change disclosure regulations. We are also closely evaluating potential impacts to our business of financial, regulatory and other proposals put forth by the current Administration and Congress as well as the Inflation Reduction Act of 2022, which was signed into law in August. The potential for policy changes may create regulatory uncertainty for our investment strategies and our portfolio companies and could adversely affect our profitability and the profitability of our portfolio companies.

Recent Developments and Transactions

CEO Appointment

On February 6, 2023, we announced that our Board of Directors has appointed Harvey M. Schwartz as our Chief Executive Officer and a member of our Board of Directors, effective February 15, 2023 (the “Commencement Date”). On the Commencement Date, Mr. Schwartz will receive inducement equity awards with a combined grant date value of $180 million, of which $108 million will be granted in the form of performance-based restricted stock units which will be eligible to vest in five equal tranches and $72 million will be granted in the form of time-based restricted stock units which will be eligible to vest ratably in four equal installments. The number of shares of common stock underlying the performance-based award will be determined by dividing the $108 million grant value by the per share accounting fair value on the Commencement Date. As we anticipate that the accounting fair value on the Commencement Date will be less than the per share closing stock price on the Commencement Date, we expect that the total face value of the performance award (i.e., the number of shares multiplied by the closing price on the Commencement Date) will be greater than $108 million. The number of shares of common stock underlying the time-based award will be determined by dividing the $72 million grant value by the per share closing stock price on the Commencement Date.

Recent Transactions

During the year ended December 31, 2022, the Company completed several transactions with the objective of driving accretive growth on an inorganic basis as outlined below.

Acquisition of CLO Management Contracts from CBAM Partners LLC

In March 2022, we acquired the management contracts related to a portfolio of assets primarily comprised of U.S. and European CLOs as well as other assets across private credit from CBAM Partners LLC (“CBAM”). The purchase price of $812.9 million consisted of a combination of $618.4 million in cash, approximately 4.2 million newly issued, fully vested common shares ($194.5 million based on the value of the shares at closing), and approximately $3.4 million of acquisition costs incurred by us in connection with the transaction. The portfolio of $15 billion in assets under management was integrated into our Global Credit platform. See Note 4 to the consolidated financial statements for additional information regarding the acquisition.

Fortitude Capital Raise and Strategic Advisory Services Agreement

In March 2022, we raised $2.0 billion in third-party equity capital for Fortitude, and committed up to $100 million in additional capital to Carlyle FRL from our balance sheet. In May 2022, Fortitude called $1.1 billion of the capital raise, with the remaining capital expected to be called in 2023. In connection with the capital raise and subsequent funding, our indirect ownership of Fortitude decreased from 19.9% to 13.5%. As a result of this dilution, we recorded a reduction in the carrying value of our equity method investment and corresponding loss of $176.9 million in our U.S. GAAP results. At the time the remaining capital is called by Fortitude, our indirect ownership will further decrease to 10.5% and we expect to record an additional reduction in the carrying value of our equity method investment and corresponding loss of approximately $121 million based on the carrying value of $646.0 million as of December 31, 2022, subject to change based on the timing of the dilution and changes in the carrying value of our investment.

On April 1, 2022, we entered into a new strategic advisory services agreement with certain subsidiaries of Fortitude through a newly-formed investment advisor, Carlyle Insurance Solutions Management L.L.C. (“CISM”). Under the agreement,

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CISM provides Fortitude with certain services, including business development and growth, transaction origination and execution, and capital management services in exchange for a recurring management fee based on Fortitude’s general account assets, which adjusts within an agreed range based on Fortitude’s overall profitability. Third party investors who participated in the March 2022 capital raise also made a minority investment in CISM, which is reflected as a non-controlling interest in consolidated entities in the condensed consolidated financial statements. See Note 6 to the consolidated financial statements for additional information regarding the strategic investment in Fortitude.

Acquisition of Abingworth

On August 1, 2022, we acquired Abingworth, a life sciences investment firm, to expand our healthcare investment platform with the addition of nearly $2 billion in assets under management and a specialized team of over 20 investment professionals and advisors. Consideration for Abingworth included a base purchase price of $186.2 million, of which $25.0 million was settled in newly-issued shares of the Company’s common stock, as well as up to a further $130 million in future incentive payments based on the achievement of certain performance targets. The acquisition included the rights to 15% of performance revenues generated by Abingworth’s two most recent active investment funds, Abingworth Bioventures 8 LP and Abingworth Clinical Co-Development Fund 2 LP. See Note 4 to the consolidated financial statements for additional information regarding the acquisition.

Dividends

In February 2023, the Board of Directors declared a quarterly dividend of $0.325 per common share to common stockholders of record at the close of business on February 22, 2023, payable on March 1, 2023.

In February 2023, the Board of Directors approved an increase in the anticipated common stock dividend to an annual rate of $1.40 per share ($0.35 per common share on a quarterly basis), anticipated to commence for the first quarter 2023 dividend, which is anticipated to be paid in May 2023.

Key Financial Measures

Our key financial measures are discussed in the following pages. Additional information regarding these key financial measures and our other significant accounting policies can be found in Note 3 to the consolidated financial statements included in this Annual Report on Form 10-K.

Revenues

Revenues primarily consist of fund management fees, incentive fees, investment income (including performance allocations, realized and unrealized gains of our investments in our funds and other principal investments), as well as interest and other income.

Fund Management Fees. Fund management fees include management fees and transaction and portfolio advisory fees.

We earn management fees for advisory services we provide to funds in which we hold a general partner interest or with which

we have an investment advisory or investment management agreement. Additionally, management fees include catch-up

management fees, which are episodic in nature and represent management fees charged to fund investors in subsequent closings

of a fund which apply to the time period between the fee initiation date and the subsequent closing date. We also earn management fees on our CLOs and other structured products. Collectively, our carry funds and our CLOs and certain other products comprise 78% of our Fee-earning AUM as of December 31, 2022 and approximately 92% of our fund management fees during the year then ended. The balance of our Fee-earning AUM and fund management fees are attributable to our Perpetual Capital products, which have an indefinite term and for which there is no immediate requirement to return capital to investors as investments are realized.

Management fees attributable to Carlyle Partners VIII, L.P. (“CP VIII”), our eighth U.S. buyout fund with $13.1 billion of Fee-earning AUM as of December 31, 2022 was approximately 10% of fund management fees recognized during the year ended December 31, 2022. Management fees attributable to Carlyle Partners VII, L.P. (“CP VII”), our seventh U.S. buyout fund with approximately $15.5 billion of Fee-earning AUM as of December 31, 2022, was 10% of total management fees recognized during the year ended December 31, 2022, and 15% and 17% during the years ended December 31, 2021 and 2020, respectively. No other fund generated over 10% of total management fees in the periods presented.

Fund management fees exclude the reimbursement of any partnership expenses paid by the Company on behalf of the Carlyle funds pursuant to the limited partnership agreements, including amounts related to the pursuit of actual, proposed, or

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unconsummated investments, professional fees, expenses associated with the acquisition, holding and disposition of investments, and other fund administrative expenses.

Transaction and Portfolio Advisory Fees. Transaction and portfolio advisory fees generally include capital markets fees generated by Carlyle Global Capital Markets (“GCM”) in connection with activities related to the underwriting, issuance and placement of debt and equity securities, and loan syndication for our portfolio companies and third-party clients, which are generally not subject to rebate offsets with respect to our most recent vintages (but are subject to the rebate offsets set forth above for older funds). Underwriting fees include gains, losses and fees arising from securities offerings in which we participate in the underwriter syndicate.

Transaction and portfolio advisory fees also include fees we receive for the transaction and portfolio advisory services we provide to our portfolio companies. When covered by separate contractual agreements, we recognize transaction and portfolio advisory fees for these services when the performance obligation has been satisfied and collection is reasonably assured. We are required to offset our fund management fees earned by a percentage of these transaction and advisory fees earned, which we refer to as the “rebate offsets,” which generally range from 80% to 100%.

The recognition of portfolio advisory fees, transaction fees, and capital markets fees can be volatile as they are primarily generated by investment activity within our funds, and therefore are impacted by our investment pace.

Incentive Fees. Incentive fees consist of performance-based incentive arrangements pursuant to management contracts, primarily from certain of our Global Credit funds, when the return on assets under management exceeds certain benchmark returns or other performance targets. In such arrangements, incentive fees are recognized when the performance benchmark has been achieved.

Investment Income. Investment income consists of our performance allocations as well as the realized and unrealized gains and losses resulting from our equity method investments and other principal investments.

Performance allocations consist principally of the performance-based capital allocation from fund limited partners to us, commonly referred to as carried interest, from certain of our investment funds, which we refer to as the “carry funds.” Carried interest revenue is recognized by Carlyle upon appreciation of the valuation of our funds’ investments above certain return hurdles as set forth in each respective partnership agreement and is based on the amount that would be due to us pursuant to the fund partnership agreement at each period end as if the funds were liquidated at such date. Accordingly, the amount of carried interest recognized as performance allocations reflects our share of the fair value gains and losses of the associated funds’ underlying investments measured at their then-current fair values relative to the fair values as of the end of the prior period. As a result, the performance allocations earned in an applicable reporting period are not indicative of any future period, as fair values are based on conditions prevalent as of the reporting date. Refer to “— Trends Affecting our Business” for further discussion.

We account for our strategic investments in NGP under the equity method of accounting. Our investments in NGP include the equity interests in NGP Management Company, L.L.C. (“NGP Management”) and the general partners of certain carry funds advised by NGP. These interests entitle us to an allocation of income equal to 55.0% of the management fee-related revenues of NGP Management, which serves as the investment advisor to certain NGP funds as well as 47.5% of the performance allocations received by the NGP Carry Funds. We record investment income (loss) for our equity income allocation from NGP management fee-related revenues and also record our share of any allocated expenses from NGP Management, expenses associated with the compensatory elements of the strategic investment, and the amortization of the basis differences related to the definite-lived identifiable intangible assets of NGP Management. We also record our equity income allocation from NGP performance allocations in principal investment income (loss) from equity method investments rather than performance allocations in our consolidated statements of operations. We do not control or manage NGP. Moreover, we do not operate NGP’s business, have representation on NGP’s board or serve as an investment advisor to any investment fund sponsored by NGP, nor do we direct the operations of any of NGP portfolio companies. While we have consent rights over certain major actions by NGP outside of the ordinary course of NGP’s business (including, for example, consent rights over items such as amendments to the organizational documents of the entity in which we are invested, changes to the management fee streams earned by NGP under its fund agreements, or the incurrence of certain debt by NGP and other similar items), we have no voting rights or consent rights on any NGP investment committee that selects investments to be made by NGP funds. For further information regarding our strategic investments in NGP, refer to Note 6 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

In addition to the performance allocations from our Global Private Equity and Global Credit carry funds, and the NGP Carry Funds, we are also entitled to receive performance allocations from our Global Investment Solutions and Carlyle

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Aviation funds. We also retained our interest in the net accrued performance allocations of existing funds at the time of the sale of MRE. The timing of performance allocations realizations for these funds is typically later than in our other carry funds based on the terms of such arrangements.

Our performance allocations are generated by a diverse set of funds with different vintages, geographic concentration, investment strategies and industry specialties. For an explanation of the fund acronyms used throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations section, refer to “Item 1. Business—Our Global Investment Offerings.”

Performance allocations, before the impact of performance allocations related compensation, in excess of 10% of the total for the years ended December 31, 2022, 2021 and 2020 were generated from the following funds:

No other fund generated over 10% of performance allocations in the periods presented above. The reversal of $453.2 million in previously recognized performance allocations in CP VI during 2022 was primarily driven by depreciation in the portfolio, notably its publicly traded investments, which comprise approximately 43% of its remaining fair value as of December 31, 2022. Performance allocations from CP VI during 2021 were driven by appreciation across the portfolio, with notable increases in the values of the publicly traded investments in the portfolio and sale transactions of privately held investments.

Under our arrangements with the historical owners and management team of AlpInvest, we generally do not retain any carried interest in respect of the historical investments and commitments to our fund vehicles that existed as of July 1, 2011 (including any options to increase any such commitments exercised after such date). We are entitled to 15% of the carried interest in respect of commitments from the historical owners of AlpInvest for the period between 2011 and 2020, except in certain instances, and 40% of the carried interest in respect of all other commitments (including all future commitments from third parties). In certain instances, carried interest associated with the AlpInvest fund vehicles is subject to entity level income taxes in the Netherlands.

Realized carried interest may be clawed back or given back to the fund if the fund’s investment values decline below certain return hurdles, which vary from fund to fund. When the fair value of a fund’s investments remains constant or falls below certain return hurdles, previously recognized performance allocations are reversed. In all cases, each investment fund is considered separately in evaluating carried interest and potential giveback obligations. For any given period, performance allocations revenue on our statement of operations may include reversals of previously recognized performance allocations due to a decrease in the value of a particular fund that results in a decrease of cumulative performance allocations earned to date. Since fund return hurdles are cumulative, previously recognized performance allocations also may be reversed in a period of appreciation that is lower than the particular fund’s hurdle rate. Additionally, unrealized performance allocations reverse when performance allocations are realized, and unrealized performance allocations can be negative if the amount of realized performance allocations exceed total performance allocations generated in the period. For the years ended December 31, 2022, 2021 and 2020, the reversals of performance allocations, before the impact of reversals of the related compensation, were $558.7 million, $48.2 million and $401.5 million, respectively.

As of December 31, 2022, accrued performance allocations and accrued giveback obligations were approximately $7.1 billion and $40.9 million, respectively. Each balance assumes a hypothetical liquidation of the funds’ investments at December 31, 2022 at their then current fair values. These assets and liabilities will continue to fluctuate in accordance with the fair values of the funds’ investments until they are realized. As of December 31, 2022, $18.9 million of the accrued giveback obligation is the responsibility of various current and former senior Carlyle professionals and other limited partners of the Carlyle Holdings partnerships, and the net accrued giveback obligation attributable to the Company is $22.0 million. The Company uses “net accrued performance revenues” to refer to the aggregation of the accrued performance allocations and incentive fees net of (i) accrued giveback obligations, (ii) accrued performance allocations and incentive fee-related

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compensation, (iii) performance allocations and incentive fee-related tax obligations, and (iv) accrued performance allocations and incentive fees attributable to non-controlling interests and excludes any net accrued performance allocations and incentive fees that have been realized but will be collected in subsequent periods, as well as net accrued performance revenues which are presented as fee related performance revenues when realized in our non-GAAP financial measures. Net accrued performance revenues as of December 31, 2022 were $4.0 billion.

In addition, realized performance allocations may be reversed in future periods to the extent that such amounts become subject to a giveback obligation. If at December 31, 2022, all investments held by our carry funds were deemed worthless, the amount of realized and previously distributed performance allocations subject to potential giveback would be approximately $1.5 billion, on an after-tax basis where applicable, of which approximately $0.7 billion would be the responsibility of current and former senior Carlyle professionals. See the related discussion of within “—Liquidity and Capital Resources—Contingent Obligations (Giveback).”

The following table summarizes the total amount of aggregate giveback obligations that we have realized since Carlyle’s inception. Given various current and former senior Carlyle professionals and other limited partners of the Carlyle Holdings partnerships are responsible for paying the majority of the realized giveback obligation, the table below also summarizes the amount that was attributable to the Company:

The funding for employee obligations and givebacks related to carry realized pre-IPO is primarily through a collection of employee receivables related to giveback obligations and from non-controlling interests for their portion of the obligation. The realization of giveback obligations for the Company’s portion of such obligations reduces Distributable Earnings in the period realized and negatively impacts earnings available for distributions to shareholders in the period realized. Further, each individual recipient of realized carried interest typically signs a guarantee agreement or partnership agreement that personally obligates such person to return his/her pro rata share of any amounts of realized carried interest previously distributed that are later clawed back. Accordingly, carried interest as performance allocation compensation is subject to return to the Company in the event a giveback obligation is funded. Generally, the actual giveback liability, if any, does not become due until the end of a fund’s life.

Each investment fund is considered separately in evaluating carried interest and potential giveback obligations. As a result, performance allocations within funds will continue to fluctuate primarily due to certain investments within each fund constituting a material portion of the carry in that fund. Additionally, the fair value of investments in our funds may have substantial fluctuations from period to period.

In addition, in our discussion of our non-GAAP results, we use the term “realized net performance revenues” to refer to realized performance allocations and incentive fees from our funds, net of the portion allocated to our investment professionals, if any, and certain tax expenses associated with carried interest attributable to certain partners and employees, which are reflected as realized performance allocations and incentive fees related compensation expense. See “—Non-GAAP Financial Measures” for the amount of realized performance revenues recognized each period. See “—Segment Analysis” for the realized performance revenues by segment and related discussion for each period.

Investment income also represents the realized and unrealized gains and losses on our principal investments, including our investments in Carlyle funds that are not consolidated, as well as any interest and other income. Principal investment income also included our proportionate share of U.S. GAAP earnings from our strategic investment in Fortitude prior to the contribution of our investment to a Carlyle-affiliated investment fund (see Note 6 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K). Realized principal investment income (loss) is recorded when we redeem all or a portion of our investment or when we receive or are due cash income, such as dividends or distributions. A realized principal investment loss is also recorded when an investment is deemed to be worthless. Unrealized principal investment income (loss) results from changes in the fair value of the underlying investment, as well as the reversal of previously recognized unrealized gains (losses) at the time an investment is realized.

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Fair Value Measurement. U.S. GAAP establishes a hierarchical disclosure framework which ranks the observability of market price inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, will generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

The table below summarizes the valuation of investments and other financial instruments included within our AUM, by segment and fair value hierarchy levels, as of December 31, 2022:

Interest and Other Income of Consolidated Funds. Interest and other income of Consolidated Funds primarily represents the interest earned on CLO assets. The Consolidated Funds are not the same entities in all periods presented. The Consolidated Funds in future periods may change due to changes in fund terms, formation of new funds, and terminations of funds.

Net Investment Gains of Consolidated Funds. Net investment gains of Consolidated Funds measures the change in the difference in fair value between the assets and the liabilities of the Consolidated Funds. A gain (loss) indicates that the fair value of the assets of the Consolidated Funds appreciated more (less), or depreciated less (more), than the fair value of the liabilities of the Consolidated Funds. A gain or loss is not necessarily indicative of the investment performance of the Consolidated Funds and does not impact the management or incentive fees received by Carlyle for its management of the Consolidated Funds. The portion of the net investment gains (losses) of Consolidated Funds attributable to the limited partner investors is allocated to non-controlling interests. Therefore, a gain or loss is not expected to have a material impact on the revenues or profitability of the Company. Moreover, although the assets of the Consolidated Funds are consolidated onto our balance sheet pursuant to U.S. GAAP, ultimately we do not have recourse to such assets and such liabilities are generally non-recourse to us. Therefore, a gain or loss from the Consolidated Funds generally does not impact the assets available to our common stockholders.

Expenses

Compensation and Benefits. Compensation includes salaries, bonuses, equity-based compensation, and performance payment arrangements. Bonuses are accrued over the service period to which they relate.

We recognize as compensation expense the portion of performance allocations and incentive fees that are due to our employees, senior Carlyle professionals, advisors, and operating executives in a manner consistent with how we recognize the performance allocations and incentive fee revenue. These amounts are accounted for as compensation expense in conjunction with the related performance allocations and incentive fee revenue and, until paid, are recognized as a component of the accrued compensation and benefits liability. Compensation in respect of performance allocations and incentive fees is paid when the related performance allocations and incentive fees are realized, and not when such performance allocations and incentive fees are accrued. The funds do not have a uniform allocation of performance allocations and incentive fees to our employees, senior Carlyle professionals and operating executives. Therefore, for any given period, the ratio of performance allocations and incentive fee compensation to performance allocations and incentive fee revenue may vary based on the funds generating the performance allocations and incentive fee revenue for that period and their particular allocation percentages.

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In addition, we have implemented various equity-based compensation arrangements, including those under our Equity Incentive Plan. These equity-based compensation arrangements require senior Carlyle professionals and other employees to vest ownership of a portion of their equity interests over a service period of generally one to four years, which under U.S. GAAP will result in compensation charges over current and future periods. In 2021, we granted 7.1 million in long-term strategic restricted stock units to certain senior professionals. The majority of these restricted stock units are eligible to vest based on the achievement of annual performance targets over four years, with a larger proportion of the awards eligible to vest based on the 2024 performance year. On February 1, 2023, we granted a total of 9.9 million restricted stock units under the Equity Incentive Plan to our personnel, including certain senior Carlyle professionals and other key personnel. In addition, on February 15, 2023, we will grant performance- and time-based inducement equity awards in connection with the appointment of our new Chief Executive Officer. As a result of these grants, and combined with a higher share price than in periods prior to 2021, equity-based compensation expense will be higher in the coming years than it has been. Compensation charges associated with all equity-based compensation grants are excluded from Fee Related Earnings and Distributable Earnings. As of December 31, 2022, the total number of the Company’s common shares available for grant under the Equity Incentive Plan was 12,861,371, which does not reflect the restricted stock units granted on February 1, 2023. An increase in the number of shares available for grant under the plan would require shareholder approval.

We may hire additional individuals and overall compensation levels may correspondingly increase, which could result in an increase in compensation and benefits expense. As a result of prior acquisitions, we have charges associated with contingent consideration taking the form of earn-outs and profit participation, some of which are reflected as compensation expense.

General, Administrative and Other Expenses. General, administrative and other expenses include occupancy and equipment expenses and other expenses, which consist principally of professional fees, including those related to our global regulatory compliance program, external costs of fundraising, travel and related expenses, communications and information services, depreciation and amortization (including intangible asset amortization and impairment) and foreign currency transactions. We expect that general, administrative and other expenses will vary due to infrequently occurring or unusual items, such as impairment of intangible assets or lease right-of-use assets and expenses or insurance recoveries associated with litigation and contingencies. Also, in periods of significant fundraising, to the extent that we use third parties to assist in our fundraising efforts, our general, administrative and other expenses may increase accordingly. Similarly, our general, administrative and other expenses may increase as a result of professional and other fees incurred as part of due diligence related to strategic acquisitions and new product development. Additionally, we anticipate that general, administrative and other expenses will fluctuate from period to period due to the impact of foreign exchange transactions.

We also could incur additional expenses in the future related to our acquisitions including amortization of acquired intangibles and earn-outs to equity holders. As discussed in Note 7 to the consolidated financial statements, we evaluate our intangible assets (including goodwill) for impairment and could record additional impairment losses in future periods.

Interest and Other Expenses of Consolidated Funds. The interest and other expenses of Consolidated Funds consist primarily of interest expenses related primarily to our CLO loans, professional fees and other third-party expenses.

Income Taxes. Income taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using currently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period in which the change is enacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some or all of the deferred tax assets will not be realized.

In the normal course of business, we are subject to examination by federal and certain state, local and foreign tax regulators. With a few exceptions, as of December 31, 2022, our U.S. federal income tax returns for the years 2019 through 2021 are open under the normal three-years statute of limitations and therefore subject to examination. State and local tax returns are generally subject to audit from 2017 to 2021. Foreign tax returns are generally subject to audit from 2011 to 2021. Certain of our affiliates are currently under audit by federal, state and foreign tax authorities.

Non-controlling Interests in Consolidated Entities. Non-controlling interests in consolidated entities represent the component of equity in consolidated entities not held by us. These interests are adjusted for general partner allocations.

Earnings Per Common Share. We compute earnings per common share in accordance with ASC 260, Earnings Per Share. Basic earnings per common share is calculated by dividing net income (loss) attributable to the common shares of the Company by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share

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reflects the assumed conversion of all dilutive securities. We apply the treasury stock method to determine the dilutive weighted-average common shares represented by unvested restricted stock units. For certain equity-based compensation awards that contain performance or market conditions, the number of contingently issuable common shares is included in diluted earnings per common share based on the number of common shares, if any, that would be issuable under the terms of the awards if the end of the reporting period were the end of the contingency period, if the result is dilutive.

Non-GAAP Financial Measures

Distributable Earnings. Distributable Earnings, or “DE,” is a key performance benchmark used in our industry and is evaluated regularly by management in making resource deployment and compensation decisions, and in assessing the performance of our three segments. We also use DE in our budgeting, forecasting, and the overall management of our segments. We believe that reporting DE is helpful to understanding our business and that investors should review the same supplemental financial measure that management uses to analyze our segment performance. DE is intended to show the amount of net realized earnings without the effects of consolidation of the Consolidated Funds. DE is derived from our segment reported results and is an additional measure to assess performance.

Distributable Earnings differs from income (loss) before provision for income taxes computed in accordance with U.S. GAAP in that it includes certain tax expenses associated with performance revenues (comprised of performance allocations and incentive fees), and does not include unrealized performance allocations and related compensation expense, unrealized principal investment income, equity-based compensation expense, net income (loss) attributable to non-Carlyle interest in consolidated entities, or charges (credits) related to Carlyle corporate actions and non-recurring items. Charges (credits) related to Carlyle corporate actions and non-recurring items include: charges associated with acquisitions, dispositions or strategic investments, changes in the tax receivable agreement liability, corporate conversion costs, amortization and any impairment charges associated with acquired intangible assets, transaction costs associated with acquisitions and dispositions, charges associated with earnouts and contingent consideration including gains and losses associated with the estimated fair value of contingent consideration issued in conjunction with acquisitions or strategic investments, impairment charges associated with lease right-of-use assets, gains and losses from the retirement of debt, charges associated with contract terminations and employee severance. We believe the inclusion or exclusion of these items provides investors with a meaningful indication of our core operating performance. This measure supplements and should be considered in addition to and not in lieu of the results of operations discussed further under “—Consolidated Results of Operations” prepared in accordance with U.S. GAAP.

Fee Related Earnings. Fee Related Earnings, or “FRE,” is a component of DE and is used to assess the ability of the business to cover direct base compensation and operating expenses from total fee revenues. FRE differs from income (loss) before provision for income taxes computed in accordance with U.S. GAAP in that it adjusts for the items included in the calculation of DE and also adjusts DE to exclude net realized performance revenues, realized principal investment income from investments in Carlyle funds, net interest (interest income less interest expense), and certain general, administrative and other expenses when the timing of any future payment is uncertain. Fee Related Earnings includes fee related performance revenues and related compensation expense. Fee related performance revenues represent the realized portion of performance revenues that are measured and received on a recurring basis, are not dependent on realization events, and which have no risk of giveback.

Operating Metrics

We monitor certain operating metrics that are common to the asset management industry.

Fee-earning Assets under Management. Fee-earning assets under management or Fee-earning AUM refers to the assets we manage or advise from which we derive recurring fund management fees. Our Fee-earning AUM is generally based on one of the following, once fees have been activated:

(a)the amount of limited partner capital commitments, generally for carry funds where the original investment period has not expired, for AlpInvest carry funds during the commitment fee period and for Metropolitan carry funds during the weighted-average investment period of the underlying funds (see “Fee-earning AUM based on capital commitments” in the table below for the amount of this component at each period);

(b)the remaining amount of limited partner invested capital at cost, generally for carry funds and certain co-investment vehicles where the original investment period has expired and one of our business development companies (see “Fee-earning AUM based on invested capital” in the table below for the amount of this component at each period);

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(c)the amount of aggregate fee-earning collateral balance at par of our CLOs and other securitization vehicles, as defined in the fund indentures (typically exclusive of equities and defaulted positions) as of the quarterly cut-off date;

(d)the external investor portion of the net asset value of certain carry funds (see “Fee-earning AUM based on net asset value” in the table below for the amount of this component at each period);

(e)the fair value of Fortitude’s general account assets invested under the strategic advisory services agreement (see “Fee-earning AUM based on fair value and other” in the table below);

(f)the gross assets (including assets acquired with leverage), excluding cash and cash equivalents, of one of our business development companies and certain carry funds (included in “Fee-earning AUM based on lower of cost or fair value and other” in the table below); and

(g)the lower of cost or fair value of invested capital, generally for AlpInvest carry funds where the commitment fee period has expired and certain carry funds where the investment period has expired, (included in “Fee-earning AUM based on lower of cost or fair value and other” in the table below).

The table below details Fee-earning AUM by its respective components at each period.

(1)Reflects limited partner capital commitments where the original investment period, weighted-average investment period, or commitment fee period has not expired.

(2)Reflects limited partner invested capital at cost and includes amounts committed to or reserved for investments for certain Global Private Equity and Global Investment Solutions funds.

(3)Represents the amount of aggregate Fee-earning collateral balances and principal balances, at par, for our CLOs/structured products.

(4)Reflects the net asset value of certain other carry funds.

(5)Includes the fair value of Fortitude’s general account assets covered by the strategic advisory services agreement, funds with fees based on the lower of cost or fair value of invested capital and funds with fees based on gross asset value.

(6)Ending balance excludes $11.1 billion of pending Fee-earning AUM as of December 31, 2022 for which fees have not yet been activated.

The table below provides the period to period rollforward of Fee-earning AUM.

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(1)Inflows represents limited partner capital raised by our carry funds or separately managed accounts for which management fees based on commitments were activated during the period, the fee-earning commitments invested in vehicles for which management fees are based on invested capital, the fee-earning collateral balance of new CLO issuances, as well as gross subscriptions in our vehicles for which management fees are based on net asset value. Inflows exclude fundraising amounts during the period for which fees have not yet been activated, which are referenced as Pending Fee-earning AUM. Inflows for the year ended December 31, 2022 include $2 billion of Fee-earning AUM acquired as part of the August 2022 Abingworth transaction, Fee-earning AUM of $48 billion associated with the strategic advisory services agreement with Fortitude which was effective April 1, 2022, and Fee-earning AUM of $14 billion acquired in the March 2022 CBAM transaction.

(2)Outflows represents the impact of realizations from vehicles with management fees based on remaining invested capital at cost or fair value, changes in basis for funds where the investment period, weighted-average investment period or commitment fee period has expired during the period, reductions for funds that are no longer calling for fees, gross redemptions in our open-end funds, and runoff of CLO collateral balances. Distributions for funds earning management fees based on commitments during the period do not affect Fee-earning AUM. Outflows during the year ended December 31, 2021 also reflect the sale of MRE on April 1, 2021, which had $2 billion of Fee-earning AUM as of March 31, 2021.

(3)Market Activity & Other represents realized and unrealized gains (losses) on portfolio investments in our carry funds based on the lower of cost or fair value and net asset value, as well as activity of funds with fees based on gross asset value.

(4)Foreign Exchange represents the impact of foreign exchange rate fluctuations on the translation of our non-U.S. dollar denominated funds. Activity during the period is translated at the average rate for the period. Ending balances are translated at the spot rate as of the period end.

Refer to “—Segment Analysis” for a detailed discussion by segment of the activity affecting Fee-earning AUM for each of the periods presented by segment.

Assets under Management. Assets under management or “AUM” refers to the assets we manage or advise. Our AUM equals the sum of the following:

(a) the aggregate fair value of our carry funds and related co-investment vehicles, and separately managed accounts, plus the capital that Carlyle is entitled to call from investors in those funds and vehicles (including Carlyle commitments to those funds and vehicles and those of senior Carlyle professionals and employees) pursuant to the terms of their capital commitments to those funds and vehicles;

(b)     the amount of aggregate collateral balance and principal cash at par or aggregate principal amount of the notes of our CLOs and other structured products (inclusive of all positions);

(c)     the net asset value of certain carry funds;

(d)    the fair value of Fortitude’s general account assets invested under the strategic advisory services agreement; and

(e)     the gross assets (including assets acquired with leverage) of our business development companies, plus the capital that Carlyle is entitled to call from investors in those vehicles pursuant to the terms of their capital commitments to those vehicles.

We include in our calculation of AUM and Fee-earning AUM the Legacy Energy Funds that we jointly advise with Riverstone and the NGP Energy Funds that are advised by NGP. Our calculation of AUM also includes third-party capital raised for the investment in Fortitude through a Carlyle-affiliated investment fund and from a strategic investor which directly invests in Fortitude alongside the fund. The AUM and Fee-earning AUM related to the strategic advisory services agreement with Fortitude is inclusive of the net asset value of investments in Carlyle products. These amounts are also reflected in the AUM and Fee-earning AUM of the strategy in which they are invested.

For most of our carry funds, total AUM includes the fair value of the capital invested, whereas Fee-earning AUM includes the amount of capital commitments or the remaining amount of invested capital, depending on whether the original investment period for the fund has expired. As such, Fee-earning AUM may be greater than total AUM when the aggregate fair value of the remaining investments is less than the cost of those investments.

Our calculations of AUM and Fee-earning AUM may differ from the calculations of other asset managers. As a result, these measures may not be comparable to similar measures presented by other asset managers. In addition, our calculation of AUM (but not Fee-earning AUM) includes uncalled commitments to, and the fair value of invested capital in, our investment funds from Carlyle and our personnel, regardless of whether such commitments or invested capital are subject to management

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fees or performance allocations. Our calculations of AUM or Fee-earning AUM are not based on any definition of AUM or Fee-earning AUM that is set forth in the agreements governing the investment funds that we manage or advise.

We generally use Fee-earning AUM as a metric to measure changes in the assets from which we earn recurring management fees. Total AUM tends to be a better measure of our investment and fundraising performance as it reflects investments at fair value plus available capital.

Available Capital. “Available Capital” refers to the amount of capital commitments available to be called for investments, which may be reduced for equity invested that is funded via a fund credit facility and expected to be called from investors at a later date, plus any additional assets/liabilities at the fund level other than active investments. Amounts previously called may be added back to available capital following certain distributions. “Expired Available Capital” occurs when a fund has passed the investment and follow-on periods and can no longer invest capital into new or existing deals. Any remaining Available Capital, typically a result of either recycled distributions or specific reserves established for the follow-on period that are not drawn, can only be called for fees and expenses and is therefore removed from the Total AUM calculation.

The table below provides the period to period rollforward of Total AUM.

(1)Inflows reflects the impact of gross fundraising during the period. For funds or vehicles denominated in foreign currencies, this reflects translation at the average quarterly rate, while the separately reported Fundraising metric is translated at the spot rate for each individual closing. Inflows for the year ended December 31, 2022 include $2 billion of AUM acquired as part of the August 2022 Abingworth transaction, AUM of $48 billion associated with the strategic advisory services agreement with Fortitude which was effective April 1, 2022, and AUM of $15 billion acquired in the March 2022 CBAM transaction.

(2)Outflows includes distributions net of recallable or recyclable amounts in our carry funds, related co-investment vehicles, and separately managed accounts, gross redemptions in our open-end funds, runoff of CLO collateral balances and the expiration of available capital. Outflows for the year ended December 31, 2021 also reflect the sale of Metropolitan on April 1, 2021, which had $2.4 billion of Total AUM as of March 31, 2021.

(3)Market Activity & Other generally represents realized and unrealized gains (losses) on portfolio investments in our carry funds and related co-investment vehicles, and separately managed accounts, as well as the net impact of fees, expenses and non-investment income, change in gross asset value for our business development companies and other changes in AUM.

(4)Foreign Exchange represents the impact of foreign exchange rate fluctuations on the translation of our non-U.S. dollar denominated funds. Activity during the period is translated at the average rate for the period. Ending balances are translated at the spot rate as of the period end.

Please refer to “—Segment Analysis” for a detailed discussion by segment of the activity affecting Total AUM for each of the periods presented.

Perpetual Capital. “Perpetual Capital” refers to the assets we manage or advise which have an indefinite term and for which there is no immediate requirement to return capital to investors upon the realization of investments made with such capital, except as required by applicable law. Perpetual Capital may be materially reduced or terminated under certain conditions, including reductions from changes in valuations and payments to investors, including through elections by investors to redeem their investments, dividend payments, and other payment obligations, as well as the termination of or failure to renew the respective investment advisory agreements. Perpetual Capital includes: (a) assets managed under the strategic advisory services agreement with Fortitude, (b) our Core Plus real estate fund, (c) our business development companies and certain other

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direct lending products, and (d) our Interval Fund. As of December 31, 2022, our Total AUM and Fee-earning AUM included $61.0 billion and $58.2 billion, respectively, of Perpetual Capital.

Portfolio Appreciation (Depreciation). The overall portfolio appreciation of 11% in 2022 is comprised of 6% appreciation for carry funds within our Global Private Equity segment focusing on corporate private equity, 16% for funds focusing on real estate and 48% for fund focusing on infrastructure and natural resources, 3% appreciation for carry funds in the Global Credit segment and 6% appreciation for carry funds in the Global Investment Solutions segment. Excluding the impact of foreign exchange, carry funds in our Global Investment Solutions segment appreciated 4% in 2022. Our publicly traded investments, which comprise 6% of the total fair value in our carry fund portfolio, depreciated (24)% during the year.

While there is no perfectly comparable market index benchmark for the overall portfolio or any of its segments or strategies, we would note that S&P 500 and MSCI ACWI depreciation for the year were (19)% and (20)%, respectively, while the FTSE NAREIT Composite depreciation was (28)%, the S&P Oil and Gas Exploration & Production Index appreciation was 50%, and S&P Leveraged Loan Index depreciation was (5)%.

Consolidation of Certain Carlyle Funds

The Company consolidates all entities that it controls either through a majority voting interest or as the primary beneficiary of variable interest entities. The entities we consolidate are referred to collectively as the Consolidated Funds in our consolidated financial statements. As of December 31, 2022, our Consolidated Funds represent approximately 2% of our AUM; 1% of our management fees; and 1% of our investment income or loss for the year ended December 31, 2022.

We are not required under the consolidation guidance to consolidate in our financial statements most of the investment funds we advise. However, we consolidate certain CLOs and certain other funds that we advise. As of December 31, 2022, our consolidated CLOs held approximately $6.2 billion of total assets and comprised the majority of the assets and loans payable of the Consolidated Funds. The assets and liabilities of the Consolidated Funds are generally held within separate legal entities and, as a result, the liabilities of the Consolidated Funds are non-recourse to us.

Generally, the consolidation of the Consolidated Funds has a gross-up effect on our assets, liabilities and cash flows but has no net effect on the net income attributable to the Company and equity. The majority of the net economic ownership interests of the Consolidated Funds are reflected as non-controlling interests in consolidated entities in the consolidated financial statements. Because only a small portion of our funds are consolidated, the performance of the Consolidated Funds is not necessarily consistent with or representative of the combined performance trends of all of our funds.

For further information on our consolidation policy and the consolidation of certain funds, see Note 3 to the consolidated financial statements included in this Annual Report on Form 10-K.

Consolidated Results of Operations

The following table and discussion sets forth information regarding our consolidated results of operations for the years ended December 31, 2022, 2021 and 2020. Our consolidated financial statements have been prepared on substantially the same basis for all historical periods presented; however, the consolidated funds are not the same entities in all periods shown due to changes in U.S. GAAP, changes in fund terms and the creation and termination of funds. As further described above, the consolidation of these funds primarily had the impact of increasing interest and other income of Consolidated Funds, interest and other expenses of Consolidated Funds, and net investment gains (losses) of Consolidated Funds in the year that the fund is initially consolidated. The consolidation of these funds had no effect on net income attributable to the Company for the periods presented.

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 and Year Ended December 31, 2021 Compared to Year Ended December 31, 2020.

Revenues

Total revenues decreased $4.3 billion, or 49%, for the year ended December 31, 2022 as compared to 2021 and increased $5.8 billion, or 199%, for the year ended December 31, 2021 as compared to 2020. The following table provides the components of the changes in total revenues for the years ended December 31, 2022 and 2021:

Fund Management Fees. Fund management fees increased $362.6 million, or 22%, for the year ended December 31, 2022 as compared to 2021, and increased $181.5 million, or 12%, for the year ended December 31, 2021 as compared to 2020, primarily due to the following:

(1) The change in the year ended December 31, 2022 includes a $12.7 million loss related to the purchase of third party investor interests in a Global Investment Solutions product, which was recorded as a reduction to fund management fees.

Fund management fees include transaction and portfolio advisory fees, net of rebate offsets, of $106.2 million, $90.7 million, and $50.8 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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Investment Income. Investment income decreased $4.8 billion for the year ended December 31, 2022 as compared to 2021, and increased $5.6 billion for the year ended December 31, 2021 as compared to 2020. The components of investment income are included in the following table:

(1) All other investment income in 2021includes investment income of $49.8 million associated with the remeasurement of a corporate investment, which was previously carried at cost, resulting from an observable price change pursuant to ASC 321, Investments–Equity Securities.

Investment income during the years ended December 31, 2022, 2021 and 2020 primarily reflects carry fund appreciation of 11%, 41%, and 10%, respectively, which resulted in significantly higher performance allocations in 2021 relative to 2022 and 2020, as discussed below. Investment loss from our equity method investment in Carlyle FRL during the year ended December 31, 2022 includes an investment loss of $176.9 million which was recorded as a result of the dilution in our indirect ownership in Fortitude from 19.9% to 13.5% in connection with the initial drawdown of the Fortitude capital raise. The year ended December 31, 2020 also includes a loss in principal investment income (loss) of $620.7 million related to the contribution of our 19.9% interest in Fortitude to Carlyle FRL, at which time we began accounting for our investment under the equity method based on our net asset value in the fund. As of December 31, 2022, our investment in Carlyle FRL was $646.0 million, relative to our cost of $389.4 million. See Note 6 to the consolidated financial statements for more information regarding our equity method investment in Carlyle FRL and the Control Transaction.

Our investment in NGP entitles us to 55% of the management fee-related revenue of the NGP entities that serve as advisors to the NGP Energy Funds and is subject to impairment under the U.S. GAAP accounting for equity method investments. We evaluate our equity method investment in NGP for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable, but no less than quarterly. For example, challenges with fundraising or lower future management fees could cause an impairment of our investment in NGP in the future. As of December 31, 2022, we continue to believe that our investment in NGP is not impaired.

We recorded a decrease in investment income from CLOs during the year ended December 31, 2022 relative to the comparable period in 2021. The fair value of the CLO investments held by the firm (before the effects of consolidation) decreased 24% in 2022, with our investments in subordinated notes depreciating 37% and our investments in the senior notes depreciating 13% during 2022.

Performance Allocations. Performance allocations decreased $4.8 billion for the year ended December 31, 2022 compared to 2021 and increased $4.4 billion for the year ended December 31, 2021 as compared to 2020. Performance allocations by segment for the years ended December 31, 2022, 2021 and 2020 comprised the following:

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(1) The Company’s primary and secondary investments in external funds are generally valued based on its proportionate share of the net assets provided by the third party general partners of the underlying fund partnerships based on the most recent available information which typically has a lag of up to 90 days. As a result, amounts presented may not include the impact of economic activity in the current quarter.

Refer to “—Key Financial Measures” for a listing of the funds with performance allocations in excess of 10% of the total for the periods presented.

The year 2022 was characterized by high inflation, significant market volatility, rapidly tightening financial conditions, a surge in the U.S. dollar against most currencies, and weakening fundamentals across the globe. Estimates of S&P 500 constituents’ earnings growth for 2022 were steadily marked down throughout the year, and currently stand at 4.6% in 2022. The Dow Jones, S&P 500, and Nasdaq 100 fell 8.8%, 19.4 %, and 33%, respectively, in 2022. Globally, the MSCI ACWI, EuroStoxx 600, and Shanghai Composite fell 19.8%, 12.9%, and 15.1%, respectively, over the same period. Our carry fund portfolio continued to reflect the impact of the broader macroeconomic environment in the fourth quarter but outperformed the global equity markets for the year. Within our Global Private Equity segment, our corporate private equity funds appreciated 1% in the fourth quarter and 6% for the year, and our real estate funds depreciated 1% during the fourth quarter and appreciated 16% for the year. Our infrastructure and natural resources funds appreciated 2% during the fourth quarter and appreciated 48% for the year. Global Credit carry funds, which represent approximately 11% of the total Global Credit remaining fair value, appreciated 2% in the fourth quarter and 3% for the year. Global Investment Solutions funds depreciated 3% in the fourth quarter but appreciated 6% for the year, however excluding the impact of foreign currency translation of the USD-denominated investments in our EUR-based funds, our Global Investment Solutions were flat in the fourth quarter, and experienced 4% appreciation for the year. The valuations of our primary and secondary funds of funds generally reflect investment fair values on a one-quarter lag.

Interest and Other Income. Interest and other income increased $45.2 million for the year ended December 31, 2022 as compared to 2021 and increased $1.1 million for the year ended December 31, 2021 as compared to 2020. The increase for the year ended December 31, 2022 was primarily due to an increase in the reimbursement of certain costs incurred on behalf of Carlyle funds, as well as interest income from investments in CLO senior notes, due in part to the CBAM acquisition, and interest income on corporate treasury investments. The increase for the year ended December 31, 2021 was primarily as a result of an increase in the reimbursement of certain costs incurred on behalf of Carlyle funds.

Interest and Other Income of Consolidated Funds. Our CLOs generate interest income primarily from investments in bonds and loans inclusive of amortization of discounts and generate other income from consent and amendment fees. Substantially all interest and other income of the CLOs and other consolidated funds together with interest expense of our CLOs and net investment gains (losses) of Consolidated Funds is attributable to the related funds’ limited partners or CLO investors. Accordingly, such amounts have no material impact on net income attributable to the Company.

Interest and other income of consolidated funds increased $57.8 million for the year ended December 31, 2022 as compared to 2021, and increased $26.4 million for the year ended December 31, 2021 as compared to 2020. Substantially all of the variance in interest and other income of Consolidated Funds for both periods relates to interest income from CLOs.

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Expenses

Total expenses decreased $1.9 billion for the year ended December 31, 2022 as compared to 2021, and increased $2.4 billion for the year ended December 31, 2021 as compared to 2020. The following table provides the components of the changes in total expenses for the year ended December 31, 2022 and 2021:

Total Compensation and Benefits. Total compensation and benefits decreased $2.1 billion for the year ended December 31, 2022 as compared to 2021, and increased $2.3 billion for the year ended December 31, 2021 as compared to 2020, due to the following:

Cash-based compensation and benefits. Cash-based compensation and benefits increased $144.0 million, or 16%, for the year ended December 31, 2022 as compared to 2021, and increased $58.4 million, or 7%, for the year ended December 31, 2021 as compared to 2020, primarily due to the following:

(1) The Carlyle Aviation Partners acquisition included an earn-out of up to $150.0 million, under which we have paid $53.6 million through December 31, 2022. The Abingworth acquisition included an earn-out of up to $130.0 million. For additional information, refer to “—Liquidity and Capital Resources—Contingent Cash Payments For Business Acquisitions and Strategic Investments.”

Equity-based compensation. Equity-based compensation, net of forfeitures, decreased $9.1 million, or 6%, for the year ended December 31, 2022 as compared to 2021. The decrease in equity-based compensation from 2021 to 2022 was primarily driven by fewer performance-based restricted stock units expected to vest based on 2022 performance compared to 2021, partially offset by $10 million of expense related to the modification of certain restricted stock awards in connection with the departure of our former chief executive officer. On February 1, 2023, we granted a total of 9.9 million restricted stock units to our personnel, including certain senior Carlyle professionals and other key personnel. In addition, on February 15, 2023, we

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will grant performance- and time-based inducement equity awards in connection with the appointment of our new Chief Executive Officer. As a result of these grants, and combined with a higher share price than in prior periods, we expect that equity-based compensation expense will be higher in the coming years than it has been.

The increase in equity-based compensation from 2020 to 2021 was primarily due to the expanded use of equity-based compensation incentive programs as well as a forfeiture credit recorded in 2020 related to the retirement of one of our co-chief executive officers. During the year ended December 31, 2021, we granted 7.1 million long-term strategic restricted stock units to certain senior professionals, the majority of which are eligible to vest based on the achievement of annual performance targets over four years, with a larger proportion of the awards eligible to vest based on the 2024 performance year.

Performance allocations and incentive fee related compensation expense. Performance allocations and incentive fee related compensation expense decreased $2.2 billion for the year ended December 31, 2022 as compared to 2021 and increased $2.2 billion for the year ended December 31, 2021 as compared to 2020. Performance allocations and incentive fee related compensation as a percentage of performance allocations and incentive fee was 52%, 48%, and 47% for the years ended December 31, 2022, 2021 and 2020, respectively. Performance allocations and incentive fee related compensation as a percentage of performance allocations and incentive fees fluctuates depending on the mix of funds contributing to performance allocations and incentive fees in a given period. For our largest segment, Global Private Equity, our performance allocations and incentive fee related compensation expense as a percentage of performance allocations and incentive fees is generally around 45%. Performance allocations from our Global Investment Solutions segment pay a higher ratio of performance allocations and incentive fees as compensation, primarily as a result of the terms of our acquisition of AlpInvest (see “—Key Financial Measures—Revenues—Investment Income” for more information regarding the terms of our acquisition).

General, Administrative and Other Expenses. General, administrative and other expenses increased $144.1 million for the year ended December 31, 2022 as compared to 2021, and increased $82.4 million for the year ended December 31, 2021 as compared to 2020, primarily due to:

(1)    Intangible asset amortization increase for the year ended December 31, 2022 as compared to 2021 was primarily related to the CBAM and Abingworth acquisitions. See Note 4 to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for more information.

(2)    Foreign exchange adjustments are primarily driven by the revaluation on our European CLO investments. Foreign exchange adjustments for the year ended December 31, 2021 also include a loss of $14.7 million from the sale of our local Brazilian management entity related to amounts previously recorded in accumulated other comprehensive income.

(3)     In connection with the April 1, 2021 sale of MRE, we entered into a sublease of certain office space in New York which resulted in a $26.8 million right-of-use asset impairment charge.

(4)    General, administrative and other expenses in 2020 included the positive impact of a $29.9 million recovery of litigation costs. See Note 8 to the consolidated financial statements in Part II, Item 8 to the 2021 Annual Report on Form 10-K.

(5) The year ended December 31, 2022 includes $7.5 million in advances to a portfolio company which have been fully reserved as an expense until recovered.

Interest. Interest decreased $2.9 million for the year ended December 31, 2022 as compared to 2021 primarily due to lower interest accruals on the 3.875% Senior Notes, which were redeemed in November 2021, and interest expense of $10.1 million recorded in 2021 upon their early extinguishment. These impacts were partially offset by higher interest on CLO

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term loans, mainly related to CBAM, and higher interest accruals on the Subordinated Notes issued in May 2021. Interest increased $19.3 million for the year ended December 31, 2021 as compared to 2020 primarily due to interest accrued on the Subordinated Notes, as well as $10.1 million of interest expense recorded upon the early extinguishment of the 3.875% Senior Notes in November 2021. These increases were partially offset by lower interest accruals on the 3.875% Senior Notes. See Note 8 to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K for more information.

Interest and Other Expenses of Consolidated Funds. Interest and other expenses of Consolidated Funds increased $33.1 million for the year ended December 31, 2022 as compared to 2021, and increased $15.0 million for the year ended December 31, 2021 as compared to 2020, primarily due to higher interest expense on the consolidated CLOs.

The CLOs incur interest expense on their loans payable and incur other expenses consisting of trustee fees, rating agency fees and professional fees. Substantially all interest and other income of our CLOs together with interest expense of our CLOs and net investment gains of Consolidated Funds is attributable to the related funds’ limited partners or CLO investors. Accordingly, such amounts have no material impact on net income attributable to the Company.

Other Non-operating Expenses (Income). For the year ended December 31, 2021, this caption includes a loss on the sale of our local Brazilian management entity and related transaction costs of $4.7 million and a $5.0 million gain on the sale of our interest in MRE. For the year ended December 31, 2020, this caption includes the impact of the Conversion on our tax receivable agreement liability, which was reduced by $9.3 million. See Note 11 to the consolidated financial statements in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2020 for information regarding the impact of the Conversion.

Net Investment Gains (Losses) of Consolidated Funds

For the years ended December 31, 2022, 2021 and 2020 net investment (losses) gains of Consolidated Funds was $(41.5) million, $2.5 million, and $(21.3) million, respectively, comprised of the activity of the consolidated CLOs and certain other funds. For the consolidated CLOs, the amount reflects the net gain or loss on the fair value adjustment of both the assets and liabilities. The components of net investment gains of consolidated funds for the respective periods are:

Provision (Benefit) for Income Taxes

The provision (benefit) for income taxes was $287.8 million, $982.3 million and $197.2 million for the years ended December 31, 2022, 2021 and 2020, respectively, with effective tax rates of 18.3%, 24.4% and 34.0%, respectively. The effective tax rate for the years ended December 31, 2022, 2021 and 2020 is primarily comprised of the 21% U.S. federal corporate income tax rate plus U.S. state and foreign corporate income taxes, partially offset by non-controlling interests and the impact of a tax benefit resulting from the vesting of restricted stock units. The effective tax rate for the year ended December 31, 2022 also differs from the statutory rate due to the use of foreign tax credits, a lower estimated state effective tax rate due to the mix of income during the year, and a benefit due to a restructuring of ownership in our Global Investment Solutions business. The effective tax rate for the year ended December 31, 2020 also differs from the statutory rate due to the income tax expense resulting from the Conversion (see Note 11 to the consolidated financial statements in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2020 for information regarding the impact of the Conversion). Excluding this impact from Conversion, our effective income tax rate would have been approximately 19% for the year ended December 31, 2020.

As of December 31, 2022 and 2021, the Company had federal, state, local and foreign taxes payable of $39.7 million and $93.3 million, respectively, which is recorded as a component of accounts payable, accrued expenses and other liabilities on the accompanying consolidated balance sheet.

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Net Income Attributable to Non-controlling Interests in Consolidated Entities

Net income attributable to non-controlling interests in consolidated entities was $59.7 million, $70.5 million, and $34.6 million for the years ended December 31, 2022, 2021 and 2020, respectively. These amounts are primarily attributable to the net earnings of the Consolidated Funds for each period, which are substantially all allocated to the related funds’ limited partners or CLO investors, as well as net earnings from our Insurance Solutions business allocated to certain third party investors. The net income (loss) of our Consolidated Funds, after eliminations, was $36.1 million, $2.7 million, and $8.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. Net income attributable to non-controlling interests in consolidated entities also includes net income attributable to non-controlling interests in carried interest, giveback obligations, and cash held for carried interest distributions.

Net Income (Loss) Attributable to The Carlyle Group Inc. Common Stockholders

The net income attributable to The Carlyle Group Inc. common stockholders was $1.2 billion, $3.0 billion, and $348.2 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Non-GAAP Financial Measures

The following tables set forth information in the format used by management when making resource deployment decisions and in assessing performance of our segments. These non-GAAP financial measures are presented for the years ended December 31, 2022, 2021 and 2020. Our Non-GAAP financial measures exclude the effects of unrealized performance allocations net of related compensation expense, unrealized principal investment income, consolidated funds, acquisition-and disposition-related items including amortization and any impairment charges of lease right-of-use assets or acquired intangible assets and contingent consideration taking the form of earn-outs, charges associated with equity-based compensation, changes in the tax receivable agreement liability, corporate actions and infrequently occurring or unusual events.

The following table shows our total segment Distributable Earnings, or “DE,” and Fee Related Earnings, or “FRE,” for the years ended December 31, 2022, 2021 and 2020.

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The following table sets forth our total segment revenues for the years ended December 31, 2022, 2021 and 2020.

The following table sets forth our total segment expenses for the years ended December 31, 2022, 2021 and 2020.

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Income before provision for income taxes is the U.S. GAAP financial measure most comparable to Distributable Earnings and Fee Related Earnings. The following table is a reconciliation of income before provision for income taxes to Distributable Earnings and to Fee Related Earnings.

(1)    Adjustments to unrealized principal investment income (loss) during the year ended December 31, 2020 are inclusive of $211.8 million of unrealized gains resulting from changes in the fair value of embedded derivatives related to certain reinsurance contracts included in Fortitude’s U.S. GAAP financial statements prior to the contribution of our investment in Fortitude to Carlyle FRL on June 2, 2020. At the time of the contribution of our investment to Carlyle FRL, we began accounting for our investment under the equity method based on our net asset value in the fund, which is an investment company that accounts for its investment in Fortitude at fair value. This resulted in an unrealized loss in principal investment income (loss) of $620.7 million during the year ended December 31, 2020.

(2)    Adjusted unrealized principal investment income (loss) from the investment in Fortitude represents 19.9% of Fortitude’s estimated net income (loss), excluding the unrealized gains (losses) related to embedded derivatives, prior to the contribution of our investment in Fortitude to Carlyle FRL on June 2, 2020.

(3)    Equity-based compensation for the years ended December 31, 2022, 2021 and 2020 includes amounts presented in principal investment income and general, administrative and other expenses in our U.S. GAAP statement of operations.

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(4)     See reconciliation to most directly comparable U.S. GAAP measure below:

(5)    Adjustments to performance revenues and principal investment income (loss) relate to (i) unrealized performance allocations net of related compensation expense and unrealized principal investment income, which are excluded from the Non-GAAP results, (ii) amounts earned from the Consolidated Funds, which are eliminated in the U.S. GAAP consolidation but are included in the Non-GAAP results, (iii) amounts attributable to non-controlling interests in consolidated entities, which are excluded from the Non-GAAP results, (iv) the reclassification of NGP performance revenues, which are included in principal investment income in the U.S. GAAP financial statements, (v) the reclassification of fee related performance revenues, which are included in fund level fee revenues in the Non-GAAP results, and (vi) the reclassification of tax expenses associated with certain foreign performance revenues. Adjustments to principal investment income (loss) also include the reclassification of earnings for the investment in NGP Management and its affiliates to the appropriate operating captions for the Non-GAAP results, and the exclusion of charges associated with the investment in NGP Management and its affiliates that are excluded from the Non-GAAP results, and the exclusion of the principal investment loss from the dilution of the indirect investment in Fortitude (see Note 6 to the consolidated financial statements).

Distributable Earnings for our reportable segments is as follows:

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Segment Analysis

Discussed below is our DE and FRE for our segments for the periods presented. Our segment information is reflected in the manner used by our senior management to make operating and compensation decisions, assess performance and allocate resources.

For segment reporting purposes, revenues and expenses are presented on a basis that deconsolidates our Consolidated Funds. As a result, segment revenues from management fees, realized performance revenues and realized principal investment income (loss) are different than those presented on a consolidated U.S. GAAP basis because these revenues recognized in certain segments are received from Consolidated Funds and are eliminated in consolidation when presented on a consolidated U.S. GAAP basis. Furthermore, segment expenses are different than related amounts presented on a consolidated U.S. GAAP basis due to the exclusion of fund expenses that are paid by the Consolidated Funds.

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Global Private Equity

For purposes of presenting our results of operations for this segment, our earnings from our investments in NGP are presented in the respective operating captions. The following table presents our results of operations for our Global Private Equity(1) segment:

(1) On August 31, 2021, we sold 100% of our interest in our local Brazilian management entity and entered into a sub-advisory agreement with the acquiring company, which will provide advisory services with respect to Carlyle’s Brazilian portfolio. The loss on the sale and related transaction costs of $4.7 million and foreign currency translation loss of $14.7 million are not included in DE or FRE. See “Non-GAAP Financial Measures” for the reconciliation of Total DE and FRE to the U.S. GAAP financial statements.

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 and Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Distributable Earnings

Distributable earnings decreased $516.3 million for the year ended December 31, 2022 as compared to 2021, and increased $1.4 billion for the year ended December 31, 2021 as compared to 2020. The following table provides the components of the changes in distributable earnings for the years ended December 31, 2022 and 2021:

Realized Net Performance Revenues. Realized net performance revenues decreased $609.1 million for the year ended December 31, 2022 as compared to 2021, primarily driven by lower realization activity in our U.S. buyout and U.S. real estate funds, partially offset by higher realizations in our Europe buyout. During the year ended December 31, 2022, we realized performance revenues for the first time on our fourth Europe buyout and fourth Europe Technology funds.

Realized net performance revenues increased $1.3 billion for the year ended December 31, 2021 as compared to 2020, primarily driven by realization activity in our U.S., Europe and Asia buyout funds, as well as our U.S. real estate funds. During the year ended December 31, 2021 we realized performance revenues for the first time on our eighth U.S. real estate fund, our fourth Asia buyout fund, and our third Japan buyout fund.

Realized net performance revenues were primarily generated by the following funds for the years ended December 31, 2022, 2021 and 2020, respectively:

Realized Principal Investment Income. Realized principal investment income decreased $59.1 million for the year ended December 31, 2022 as compared to 2021 and increased $115.8 million for the year ended December 31, 2021 as compared to 2020. The decrease in realized principal investment income for the year ended December 31, 2022 as compared to 2021 was primarily driven by decreases in realized principal investment income from our U.S. buyout, U.S. real estate and U.S. growth funds, partially offset by an increase in realized principal investment income from our NGP Energy funds.

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The increase in realized principal investment income for the year ended December 31, 2021 as compared to 2020 was primarily driven by increases in realized principal investment income from our U.S. buyout and U.S. real estate funds, as well as our Europe buyout and U.S. growth funds.

Fee Related Earnings

Fee related earnings increased $138.3 million for the year ended December 31, 2022 as compared to 2021, and increased $19.3 million for the year ended December 31, 2021 as compared to 2020. The following table provides the components of the change in fee related earnings for the years ended December 31, 2022 and 2021:

Fee Revenues. Total fee revenues increased $253.7 million for the year ended December 31, 2022 as compared to 2021 and increased $81.3 million for the year ended December 31, 2021 as compared to 2020, due to the following:

The increase in fund management fees for the year ended December 31, 2022 as compared to 2021 was primarily due to the activation of management fees on CETP V in the current year and CP VIII and CRP IX in the fourth quarter of the prior year, as well as management fees from Abingworth which was acquired in August 2022 and $9.1 million of catch-up management fees, primarily related to CP VIII. These increases were partially offset by the basis step-down in CP VII and CRP VIII and lower management fees on CP VI, on which management fees are based on invested capital.

The increase in fund management fees for the year ended December 31, 2021 as compared to 2020 was primarily due to activation of management fees on CP VIII, CRP IX, CAP Growth II and CP Growth during the current year, as well as higher management fees from CJP IV, CPI, and CRSEF, which included $3.2 million in catch-up management fees. These increases were partially offset by basis step-downs in CJP III and CEOF II, as well as lower management fees on CP VI and CEP IV, on which management fees are based on invested capital and which have had realizations over the last twelve months. CIEP II also had a decrease in management fees, driven by catch-up management fees of $6.6 million in 2020.

The increase in fee related performance revenues for the year ended December 31, 2022 as compared to 2021 was driven by CPI, which began to realize recurring fee related performance revenue during the first quarter of 2022.

The weighted average management fee rate increased to 1.39% at December 31, 2022 from 1.26% at December 31, 2021, reflecting new funds raised with higher fee rates. Fee-earning AUM increased $3.5 billion to $107.8 billion as of December 31, 2022 from $104.3 billion as of December 31, 2021.

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The weighted average management fee rate slightly increased to 1.26% at December 31, 2021 from 1.25% at December 31, 2020. Fee-earning AUM increased $12.7 billion to $104.3 billion as of December 31, 2021 from $91.6 billion as of December 31, 2020.

Portfolio advisory and transaction fees decreased for the year ended December 31, 2022 as compared to 2021, and increased for the year ended December 31, 2021 as compared to 2020. The recognition of portfolio advisory and transaction fees can be volatile as they are primarily generated by investment activity within our funds, and therefore are impacted by our investment pace.

Cash-based compensation and benefits expense. Cash-based compensation and benefits expense increased $52.1 million, or 10%, for the year ended December 31, 2022 as compared to 2021, primarily due to increased headcount, as well as an increase in compensation associated with fee related performance revenues (approximately 45% of fee related performance revenues are paid as cash-based compensation) of $33.1 million for the year ended December 31, 2022. Cash-based compensation and benefits expense increased $44.3 million for the year ended December 31, 2021 as compared to 2020, primarily due to higher year-end bonuses.

General, administrative and other indirect expenses. General, administrative and other indirect expenses increased $62.8 million for the year ended December 31, 2022 as compared to 2021, primarily due to increased professional fees, travel and conference expenses, IT expenses and external costs associated with fundraising activities. General, administrative and other indirect expenses for the year ended December 31, 2022 also include $7.5 million in advances to a portfolio company which have been fully reserved as an expense until recovered.

General, administrative and other indirect expenses decreased $5.7 million, excluding the impact of litigation cost recoveries in 2020, for the year ended December 31, 2021 as compared to 2020, primarily due to lower professional fees.

Fee-earning AUM as of and for each of the Three Years in the Period Ended December 31, 2022

Fee-earning AUM is presented below for each period together with the components of change during each respective period.

The table below breaks out Fee-earning AUM by its respective components at each period.

(1)For additional information concerning the components of Fee-earning AUM, see “—Fee-earning Assets under Management.”

(2)Represents the aggregate effective management fee rate of each fund in the segment, weighted by each fund’s Fee-earning AUM, as of the end of each period presented.

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The table below provides the period to period rollforward of Fee-earning AUM.

(1)Inflows represents limited partner capital raised by our carry funds or separately managed accounts for which management fees based on commitments were activated during the period, and the fee-earning commitments invested in vehicles for which management fees are based on invested capital. Inflows for the year ended December 31, 2022 include $2 billion of Fee-earning AUM associated with the Abingworth transaction in August 2022. Inflows exclude fundraising amounts during the period for which fees have not yet been activated, which are referenced as Pending Fee-earning AUM.

(2)Outflows represents the impact of realizations from vehicles with management fees based on remaining invested capital at cost or fair value, changes in basis for funds where the investment period, weighted-average investment period or commitment fee period has expired during the period, reductions for funds that are no longer calling for fees, and gross redemptions in open-ended vehicles with management fees based on net asset value. Realizations for funds earning management fees based on commitments during the period do not affect Fee-earning AUM.

(3)Market Activity & Other represents realized and unrealized gains (losses) on portfolio investments in our carry funds based on the lower of cost or fair value and net asset value.

(4)Foreign Exchange represents the impact of foreign exchange rate fluctuations on the translation of our non-U.S. dollar denominated funds. Activity during the period is translated at the average rate for the period. Ending balances are translated at the spot rate as of the period end.

Fee-earning AUM was $107.8 billion at December 31, 2022, an increase of $3.5 billion, or 3%, compared to $104.3 billion at December 31, 2021. This was driven by inflows of $13.0 billion primarily related to new fee-paying commitments raised in CETP V and CP VIII, new capital deployment in CPI, and $2 billion acquired as part of the Abingworth transaction in August 2022. Partially offsetting the increase were realizations of $8.3 billion in funds that charge fees based on invested capital and $1.2 billion in negative foreign exchange activity primarily from the translation of our EUR-denominated funds’ AUM to USD. Investment and distribution activity by funds still in the investment period does not impact Fee-earning AUM as these funds are based on commitments.

Fee-earning AUM was $104.3 billion at December 31, 2021, an increase of $12.7 billion, or 14%, compared to $91.6 billion at December 31, 2020. This was driven by inflows of $24.6 billion primarily related to the activation of management fees in CP VIII, CRP IX, and CP Growth, as well as capital invested in CPI. Partially offsetting the increase were outflows of $10.9 billion from the step-down of management fees in CP VII and CRP VIII and distributions in other funds outside of their investment period. Negative foreign exchange activity of $1.3 billion resulted from the translation of our Europe buyout, growth, and real estate AUM from EUR to USD.

Fee-earning AUM was $91.6 billion at December 31, 2020, a decrease of $3.2 billion, or 3%, compared to $94.8 billion at December 31, 2019. This was driven by outflows of $9.5 billion which were principally a result of dispositions in our U.S. Buyout, NGP Energy, and Legacy Energy funds, as well as distributions in other funds outside of their investment period. This was offset by inflows of $5.4 billion primarily related to the activation of management fees in CJP IV, subscriptions in CPI, and new fee-paying commitments raised in various other funds. Also offsetting the decrease was positive foreign exchange activity of $1.2 billion from the translation of our Europe Buyout, Growth, and Real Estate AUM from EUR to USD.

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Total AUM as of and for each of the Three Years in the Period Ended December 31, 2022

The table below provides the period to period rollforward of Total AUM.

(1)Inflows reflects the impact of gross fundraising during the period. For funds or vehicles denominated in foreign currencies, this reflects translation at the average quarterly rate, while the separately reported Fundraising metric is translated at the spot rate for each individual closing. Inflows for the year ended December 31, 2022 include $2 billion of AUM associated with the August 2022 Abingworth transaction.

(2)Outflows includes distributions net of recallable or recyclable amounts in our carry funds, related co-investment vehicles, and separately managed accounts, gross redemptions in our open-end funds, and the expiration of available capital.

(3)Market Activity & Other represents realized and unrealized gains (losses) on portfolio investments in our carry funds based on the lower of cost or fair value.

(4)Foreign Exchange represents the impact of foreign exchange rate fluctuations on the translation of our non-U.S. dollar denominated funds. Activity during the period is translated at the average rate for the period. Ending balances are translated at the spot rate as of the period end.

Total AUM was $163.1 billion at December 31, 2022, an increase of $1.0 billion, or 1%, compared to $162.1 billion at December 31, 2021. Driving the increase were $12.6 billion of portfolio appreciation and $12.4 billion of inflows, largely attributable to additional capital raised in CETP V and CP VIII, as well as $2 billion of AUM acquired as part of the Abingworth transaction in August 2022. Overall portfolio appreciation was driven by appreciation of $2.9 billion in NGP XI, $1.8 billion in NGP XII, and $1.1 billion in CRP VIII, partially offset by depreciation of $2.4 billion in CP VI. The increase was largely offset by outflows of $22.1 billion primarily from distributions of investment proceeds in our U.S. Buyout, NGP Energy, Europe Buyout, Asia Buyout, and U.S. Real Estate funds, as well as $1.9 billion of negative foreign exchange activity primarily from the translation of our EUR-denominated funds’ AUM to USD.

Total AUM was $162.1 billion at December 31, 2021, an increase of $30.3 billion, or 23%, compared to $131.8 billion at December 31, 2020. This increase was driven by $27.2 billion of inflows primarily due to fundraising in CP VIII, CRP IX, CPI, and CP Growth, as well as portfolio appreciation of $32.7 billion. The carry funds driving appreciation for the period included $7.3 billion attributable to CP VI, $3.7 billion attributable to CP VII, $1.9 billion attributable to CEP IV, and $1.7 billion attributable to CRP VIII. The increase was partially offset by $27.8 billion of outflows primarily from distributions and the expiration of dry powder in our U.S. Buyout, U.S. Real Estate, and Europe Buyout funds, and $(1.8) billion in foreign exchange activity primarily from the translation of our Europe Buyout, Growth, and Real Estate AUM from EUR to USD.

Total AUM was $131.8 billion at December 31, 2020, an increase of $2.0 billion, or 2%, compared to $129.8 billion at December 31, 2019. This increase was driven by $3.6 billion of inflows primarily due to fundraising in CPI, CIEP II, and CJP IV. Also contributing to this increase was portfolio appreciation of $6.4 billion. The carry funds driving appreciation for the period included $6.1 billion attributable to CP VI, $1.3 billion attributable to CAP IV, and $0.8 billion attributable to CP VII, offset by $(1.0) billion attributable to NGP XI and $(0.5) billion attributable to CIEP I. The increase of $1.6 billion in foreign exchange activity was primarily from the translation of our Europe Buyout, Growth, and Real Estate AUM from EUR to USD. Partially offsetting the increase were $9.6 billion of outflows driven primarily by distributions in our U.S. Buyout, Asia Buyout and U.S. Real Estate funds.

Fund Performance Metrics

Fund performance information for our investment funds that generally have at least $1.0 billion in capital commitments, cumulative equity invested or total value as of December 31, 2022, which we refer to as our “significant funds,”

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is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund return information reflected in this discussion and analysis is not indicative of the performance of The Carlyle Group Inc. and is also not necessarily indicative of the future performance of any particular fund. An investment in The Carlyle Group Inc. is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns. See Part I. Item 1A. “Risk Factors—Risks Related to Our Business Operations—Risks Related to the Assets We Manage—The historical returns attributable to our funds, including those presented in this report, should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our common stock.”

The following tables reflect the performance of our significant funds in our Global Private Equity business. See Part I. Item 1. “Business—Our Global Investment Offerings” for a legend of the fund acronyms listed below.

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*Net accrued fee related performance revenues for CPI of $53 million are excluded from net accrued performance revenues. These amounts will be reflected as fee related performance revenues when realized, and included in fund level fee revenues in our segment results.

(1) Represents the original cost of investments since inception of the fund.

(2)    Represents all realized proceeds since inception of the fund.

(3)    Represents remaining fair value, before management fees, expenses and carried interest, and may include remaining escrow values for realized investments.

(4)    Multiple of invested capital (“MOIC”) represents total fair value, before management fees, expenses and carried interest, divided by cumulative invested capital.

(5)    An investment is considered realized when the investment fund has completely exited, and ceases to own an interest in, the investment. An investment is considered partially realized when the total amount of proceeds received in respect of such investment, including dividends, interest or other distributions and/or return of capital, represents at least 85% of invested capital and such investment is not yet fully realized. Because part of our value creation strategy involves pursuing best exit alternatives, we believe information regarding Realized/Partially Realized MOIC and Gross IRR, when considered together with the other investment performance metrics presented, provides investors with meaningful information regarding our investment performance by removing the impact of investments where significant realization activity has not yet occurred. Realized/Partially Realized MOIC and Gross IRR have limitations as measures of investment performance, and should not be considered in isolation. Such limitations include the fact that these measures do not include the performance of earlier stage and other investments that do not satisfy the criteria provided above. The exclusion of such investments will have a positive impact on Realized/Partially Realized MOIC and Gross IRR in instances when the MOIC and Gross IRR in respect of such investments are less than the aggregate MOIC and Gross IRR. Our measurements of Realized/Partially Realized MOIC and Gross IRR may not be comparable to those of other companies that use similarly titled measures.

(6)    Gross Internal Rate of Return (“Gross IRR”) represents an annualized time-weighted return on Limited Partner invested capital, based on contributions, distributions and unrealized fair value as of the reporting date, before the impact of management fees, partnership expenses and carried interest. For fund vintages 2017 and after, Gross IRR includes the impact of interest expense related to the funding of investments on fund lines of credit. Gross IRR is calculated based on the timing of Limited Partner cash flows, which may differ to varying degrees from the timing of actual investment cash flows for the fund. Subtotal Gross IRR aggregations for multiple funds are calculated based on actual cash flow dates for each fund and represent a theoretical time-weighted return for a Limited Partner who invested sequentially in each fund.

(7)    Net Internal Rate of Return (“Net IRR”) represents an annualized time-weighted return on Limited Partner invested capital, based on contributions, distributions and unrealized fair value as of the reporting date, after the impact of all management fees, partnership expenses and carried interest, including current accruals. Net IRR is calculated based on the timing of Limited Partner cash flows, which may differ to varying degrees from the timing of actual investment cash flows for the fund. Fund level IRRs are based on aggregate Limited Partner cash flows, and this blended return may differ from that of individual Limited Partners. As a result, certain funds may generate accrued performance revenues with a blended Net IRR that is below the preferred return hurdle for that fund. Subtotal Net IRR aggregations for multiple funds are calculated based on actual cash flow dates for each fund and represent a theoretical time-weighted return for a Limited Partner who invested sequentially in each fund.

(8)    Represents the net accrued performance fee balance/(giveback obligation) as of the current quarter end.

(9)    Represents all realized proceeds combined with remaining fair value, before management fees, expenses and carried interest.

(10)    Aggregate includes the following funds, as well as all active co-investments, separately managed accounts (SMAs), and stand-alone investments arranged by us: CVP II, MENA, CCI, CSSAF I, CPF I, CAP Growth I, CAP Growth II, CBPF II, CEP II, ABV 8 and ACCD 2.

(11)    Aggregate includes the following funds, as well as related co-investments, separately managed accounts (SMAs), and certain other stand-alone investments arranged by us: CP I, CP II, CP III, CP IV, CEP I, CAP I, CAP II, CBPF I, CJP I, CJP II, CMG, CVP I, CUSGF III, CGFSP I, CEVP I, CETP I, CETP II, CAVP I, CAVP II, CAGP III and Mexico.

(12)    For funds marked “NM,” IRR may be positive or negative, but is not considered meaningful because of the limited time since initial investment and early stage of capital deployment. For funds marked “Neg,” IRR is considered meaningful but is negative as of reporting period end.

(13)    For purposes of aggregation, funds that report in foreign currency have been converted to U.S. dollars at the reporting period spot rate.

(14)    Aggregate includes the following funds, as well as all active co-investments, separately managed accounts (SMAs), and stand-alone investments arranged by us: CCR, CER I, CER II, CEREP III and CRP V.

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(15)    Aggregate includes the following funds, as well as related co-investments, separately managed accounts (SMAs), and certain other stand-alone investments arranged by us: CRP I, CRP II, CRP III, CRP IV, CRCP I, CAREP I, CAREP II, CEREP I, and CEREP II.

(16)    Aggregate includes the following Legacy Energy funds and related co-investments: Energy I, Energy II, Energy III, Energy IV, Renew I, and Renew II.

(17)    Aggregate includes the following funds, as well as all active co-investments, separately managed accounts (SMAs), and stand-alone investments arranged by us: NGP GAP, NGP RP I, NGP RP II, NGP ETP IV, CPOCP, CRSEF and CRSEF II.

(18)    Aggregate includes the following funds, as well as related co-investments, separately managed accounts (SMAs), and certain other stand-alone investments arranged by us: CIP.

(19)    The fund stepdown date represents the contractual stepdown date under the respective fund agreements for funds on which the fee basis stepdown has not yet occurred. Funds without a listed Fee Initiation Date and Stepdown Date have not yet initiated fees.

(20)    All amounts shown represent total capital commitments as of December 31, 2022. Certain of our recent vintage funds are currently in fundraising and total capital commitments are subject to change.

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Global Credit

The following table presents our results of operations for our Global Credit segment:

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 and Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Distributable Earnings

Distributable earnings increased $195.8 million for the year ended December 31, 2022 as compared to 2021, and increased $3.5 million for the year ended December 31, 2021 as compared to 2020. The following table provides the components of the changes in distributable earnings for the years ended December 31, 2022 and 2021:

Realized Net Performance Revenues. Realized net performance revenues increased $73.5 million for the year ended December 31, 2022 as compared to 2021, primarily due to realized net performance revenues generated by CCOF I and our structured credit fund, partially offset by the realization of a $5.9 million net giveback obligation for CSP III in 2022.

Realized net performance revenues decreased $17.6 million for the year ended December 31, 2021 as compared to 2020 primarily due to realization of a $6.5 million net giveback obligation for CSP III in 2021 and realized net performance revenues generated from Carlyle Aviation Partners for the year ended December 31, 2020.

Realized Principal Investment Income. Realized principal investment income increased $6.2 million for the year ended December 31, 2022 as compared to 2021 and increased $13.2 million for the year ended December 31, 2021 as compared to 2020. The increase in realized principal investment income for the year ended December 31, 2022 as compared to 2021 was primarily driven by realized principal investment income from CCOF I and CCOF II in 2022, as well as the impact of realized losses on investments in CEMOF in the prior year. These impacts were partially offset by lower realized principal investment income from our U.S. CLOs and CSP IV in 2022. The increase in realized principal investment income for the year ended December 31, 2021 as compared to 2020 was primarily due to higher realized principal investment income from our U.S. CLOs and distressed credit carry funds.

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Fee Related Earnings

Fee related earnings increased $112.9 million for the year ended December 31, 2022 as compared to 2021, and increased $12.2 million for the year ended December 31, 2021 as compared to 2020. The following table provides the components of the change in fee related earnings for the years ended December 31, 2022 and 2021:

Fee Revenues. Total fee revenues increased $194.8 million for the year ended December 31, 2022 as compared to 2021 and increased $61.6 million for the year ended December 31, 2021 as compared to 2020, due to the following:

The increase in fund management fees for the year ended December 31, 2022 as compared to 2021 was primarily driven by $107.0 million in fees earned under the Fortitude strategic advisory services agreement and on the CBAM portfolio, as well as investment activity at CCOF II, which charges fees based on invested capital, the issuance of U.S. CLOs over the last twelve months, and growth in our Interval Fund.

The increase in fund management fees for the year ended December 31, 2021 as compared to 2020 was primarily driven by increased management fees from CCOF I, which earns fees based on AUM, CCOF II, which activated management fees in October 2020, record CLO origination activity, and the activation of fees on newly-raised SMAs. These increases were partially offset by lower management fees from CSP IV due to the step-down of the fee rate and basis in January 2021.

The increases in fee related performance revenues for the years ended December 31, 2022 and 2021 relative to the prior periods were driven by higher fee related performance revenues from our Interval Fund.

The weighted average management fee rate on our carry funds decreased from 1.21% at December 31, 2021 to 1.05% at December 31, 2022. The rate decrease was primarily due to investment activity in funds on which management fees are based on invested capital and have a lower fee rate, including separately managed accounts. The weighted average management fee rate on our carry funds slightly decreased from 1.22% at December 31, 2020 to 1.21% at December 31, 2021.

Portfolio advisory and transaction fees, net, and other fees for the year ended December 31, 2022 were primarily driven by transaction fees in our insurance and aviation strategies, as well as underwriting fees related to Carlyle Global Capital Markets. Portfolio advisory and transaction fees, net, and other fees for the year ended December 31, 2021 was primarily from increased underwriting fees related to Carlyle Global Capital Markets. As capital markets activity slows, we may experience a corresponding reduction in the capital markets fees we earn in connection with activities related to the underwriting, issuance and placement of debt and equity securities.

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Cash-based compensation and benefits expense. Cash-based compensation and benefits expense increased $47.1 million for the year ended December 31, 2022 as compared to 2021, primarily due to increased headcount, as well as an increase in compensation associated with fee related performance revenues (approximately 45% of fee related performance revenues are paid as cash-based compensation) of $7.5 million for the year ended December 31, 2022.

Cash-based compensation and benefits expense increased $31.0 million for the years ended December 31, 2021 and 2020, primarily due to increased headcount and higher cash bonuses.

General, administrative and other indirect expenses. General, administrative and other indirect expenses increased $34.6 million for the year ended December 31, 2022 as compared to 2021, primarily due to increases in professional fees, travel and other general expenses.

General, administrative and other indirect expenses increased $11.1 million for the year ended December 31, 2021 as compared to 2020, excluding the impact of litigation cost recoveries in 2020, primarily due to increases in professional fees, rent and other general expenses. General, administrative and other indirect expenses for the year ended December 31, 2020 also reflects expense recoveries from Carlyle FRL.

Fee-earning AUM as of and for each of the Three Years in the Period Ended December 31, 2022

Fee-earning AUM is presented below for each period together with the components of change during each respective period.

The table below breaks out Fee-earning AUM by its respective components at each period.

(1)For additional information concerning the components of Fee-earning AUM, see “—Fee-earning Assets under Management.”

(2)Includes the fair value of Fortitude’s general account assets covered by the strategic advisory services agreement and funds with fees based on gross asset value.

(3)Represents the aggregate effective management fee rate for carry funds only, weighted by each carry fund’s Fee-earning AUM, as of the end of each period presented. As of December 31, 2022, carry funds represented 13% of Global Credit Fee-earning AUM, respectively.

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The table below provides the period to period rollforward of Fee-earning AUM.

(1)Inflows represents limited partner capital raised by our carry funds or separately managed accounts for which management fees based on commitments were activated during the period, the fee-earning commitments invested in vehicles for which management fees are based on invested capital, the fee-earning collateral balance of new CLO issuances, as well as gross subscriptions in our vehicles for which management fees are based on net asset value. Inflows exclude fundraising amounts during the period for which fees have not yet been activated, which are referenced as Pending Fee-earning AUM. Inflows for the year ended December 31, 2022 include Fee-earning AUM associated with the strategic advisory services agreement with Fortitude which was effective April 1, 2022, as well as Fee-earning AUM acquired in the CBAM transaction in March 2022. Inflows associated with these transactions were $48 billion and $14 billion, respectively.

(2)Outflows represents the impact of realizations from vehicles with management fees based on remaining invested capital at cost or fair value, changes in basis for funds where the investment period, weighted-average investment period or commitment fee period has expired during the period, reductions for funds that are no longer calling for fees, gross redemptions in our open-ended funds, and run-off of CLO collateral balances. Realizations for funds earning management fees based on commitments during the period do not affect Fee-earning AUM.

(3)Market Activity & Other represents realized and unrealized gains (losses) on portfolio investments in funds or vehicles based on the lower of cost or fair value or net asset value, as well as activity of funds with fees based on gross asset value.

(4)Foreign Exchange represents the impact of foreign exchange rate fluctuations on the translation of our non-U.S. dollar denominated funds. Activity during the period is translated at the average rate for the period. Ending balances are translated at the spot rate as of the period end.

Fee-earning AUM was $121.2 billion at December 31, 2022, an increase of $69.5 billion, or 134%, compared to $51.7 billion at December 31, 2021. Driving the increase were inflows of $78.1 billion primarily from Fee-earning AUM related to the strategic advisory services agreement signed with Fortitude in April 2022 and Fee-earning AUM acquired in the CBAM transaction in March 2022, as well as investment activity in CCOF II, the activation of fees and investment activity in Aviation, and the closing of our six latest vintage U.S. CLOs and three latest vintage Europe CLOs. This increase was minimally offset by outflows of $6.8 billion primarily due to reductions for funds that are no longer calling for management fees, realizations in other funds with fees tied to invested capital, and run-off of our CLO collateral balances, as well as $1.1 billion of portfolio depreciation. Distributions from carry funds still in the investment period do not impact Fee-earning AUM as these funds are based on commitments and not invested capital.

Fee-earning AUM was $51.7 billion at December 31, 2021, an increase of $9.6 billion, or 23%, compared to $42.1 billion at December 31, 2020. Driving the increase were inflows of $13.0 billion primarily attributable to new fee-paying capital raised in our U.S. and Europe CLOs and investment activity in our opportunistic credit funds, as well as $1.5 billion of market and other activity. Partially offsetting the increase were $4.3 billion of outflows primarily related to run-off of our CLO collateral balances and dispositions from funds which charge fees on invested capital.

Fee-earning AUM was $42.1 billion at December 31, 2020, an increase of $4.2 billion, or 11%, compared to $37.9 billion at December 31, 2019. Driving the increase were inflows of $6.4 billion primarily attributable to new fee-paying capital raised in our U.S. and Europe CLOs, fee-paying third-party capital raised in our insurance business, and investment activity in CCOF I, as well as $1.2 billion in foreign exchange activity related to the translation of our EUR-denominated CLOs to USD. Partially offsetting the increase were $3.9 billion of outflows primarily related to a fee basis step-down in CEMOF II and run-off of our CLO collateral balances.

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Total AUM as of and for each of the Three Years in the Period Ended December 31, 2022

The table below provides the period to period rollforward of Total AUM.

(1)Inflows reflects the impact of gross fundraising during the period. For funds or vehicles denominated in foreign currencies, this reflects translation at the average quarterly rate, while the separately reported Fundraising metric is translated at the spot rate for each individual closing. Inflows for the year ended December 31, 2022 include AUM associated with the strategic advisory services agreement with Fortitude which was effective April 1, 2022, as well as AUM acquired in the CBAM transaction in March 2022. Inflows associated with these transactions were $48 billion and $15 billion, respectively.

(2)Outflows includes distributions net of recallable or recyclable amounts in our carry funds, related co-investment vehicles, and separately managed accounts, gross redemptions in our open-end funds, run-off of CLO collateral balances, and the expiration of available capital.

(3)Market Activity & Other generally represents realized and unrealized gains (losses) on portfolio investments in our carry funds, related co-investment vehicles, and separately managed accounts, as well as the impact of fees, expenses and non-investment income, change in gross asset value for our business development companies and other changes in AUM.

(4)Foreign Exchange represents the impact of foreign exchange rate fluctuations on the translation of our non-U.S. dollar denominated funds. Activity during the period is translated at the average rate for the period. Ending balances are translated at the spot rate as of the period end.

Total AUM was $146.3 billion at December 31, 2022, an increase of $72.9 billion, or 99%, compared to $73.4 billion at December 31, 2021. The increase was driven by $78.3 billion of inflows primarily from AUM related to the strategic advisory services agreement signed with Fortitude in April 2022, third party capital capital raised from a strategic third-party investor which directly invests in Fortitude, AUM acquired in the CBAM transaction in March 2022, the closing of our six latest vintage U.S. CLOs and three latest vintage Europe CLOs, and the first closing in CCOF III. The increase was minimally offset by outflows of $5.7 billion due to run-off of CLO and other collateral balances and distributions in our carry funds, namely in our Energy Credit and Opportunistic Credit funds.

Total AUM was $73.4 billion at December 31, 2021, an increase of $17.5 billion, or 31%, compared to $55.9 billion at December 31, 2020. This was driven by $16.9 billion of inflows primarily due to new U.S. and Europe CLO issuances, as well as fundraising in CCOF II and various platform accounts. Also driving the increase was $5.4 billion of market and other activity attributable to 22% appreciation in our carry funds and increases in the gross asset value of our BDCs and securitization vehicles. Partially offsetting the increase were outflows of $4.2 billion primarily related to run-off of our CLO collateral balances and distributions in our Distressed Credit and Energy Credit funds.

Total AUM was $55.9 billion at December 31, 2020, an increase of $6.5 billion, or 13%, compared to $49.4 billion at December 31, 2019. This was driven by $9.5 billion of inflows primarily due to new U.S. and Europe CLO issuances, fundraising in CCOF II, and closings in various platform accounts. Also driving the increase was $0.7 billion in foreign exchange activity related to the translation of our EUR-denominated CLOs to USD. Partially offsetting the increase were outflows of $4.2 billion primarily related to distributions in our Energy Credit and Aviation funds, as well as CLO run-off.

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Fund Performance Metrics

Fund performance information for certain of our Global Credit Funds is included throughout this discussion and analysis to facilitate an understanding of our results of operations for the periods presented. The fund return information reflected in this discussion and analysis is not indicative of the performance of The Carlyle Group Inc. and is also not necessarily indicative of the future performance of any particular fund. An investment in The Carlyle Group Inc. is not an investment in any of our funds. There can be no assurance that any of our funds or our other existing and future funds will achieve similar returns. See Part I. Item 1A. “Risk Factors—Risks Related to Our Business Operations—Risks Related to the Assets We Manage—The historical returns attributable to our funds, including those presented in this report, should not be considered as indicative of the future results of our funds or of our future results or of any returns expected on an investment in our common stock.”

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The following table reflects the performance of certain funds in our Global Credit business. These tables separately present funds that, as of the periods presented, had at least $1.0 billion in capital commitments, cumulative equity invested or total equity value. See Part I. Item 1. “Business—Our Global Investment Offerings” for a legend of the fund acronyms listed below.

(1)    Represents the original cost of investments since the inception of the fund. For CSP II and CSP III, reflects amounts net of investment level recallable proceeds which is adjusted to reflect recyclability of invested capital for the purpose of calculating the fund MOIC.

(2)    Represents all realized proceeds since inception of the fund.

(3)    Represents remaining fair value, before management fees, expenses and carried interest, and may include remaining escrow values for realized investments.

(4)    Multiple of invested capital (“MOIC”) represents total fair value, before management fees, expenses and carried interest, divided by cumulative invested capital.

(5)    Gross Internal Rate of Return (“Gross IRR”) represents an annualized time-weighted return on Limited Partner invested capital, based on contributions, distributions and unrealized fair value as of the reporting date, before the impact of management fees, partnership expenses and carried interest. For fund vintages 2017 and after, Gross IRR includes the impact of interest expense related to the funding of investments on fund lines of credit. Gross IRR is calculated based on the timing of Limited Partner cash flows, which may differ to varying degrees from the timing of actual investment cash flows for the fund. Subtotal Gross IRR aggregations for multiple funds are calculated based on actual cash flow dates for each fund and represent a theoretical time-weighted return for a Limited Partner who invested sequentially in each fund.

(6)    Net Internal Rate of Return (“Net IRR”) represents an annualized time-weighted return on Limited Partner invested capital, based on contributions, distributions and unrealized fair value as of the reporting date, after the impact of all management fees, partnership expenses and carried interest, including current accruals. Net IRR is calculated based on the timing of Limited Partner cash flows, which may differ to varying degrees from the timing of actual investment cash flows for the fund. Fund level IRRs are based on aggregate Limited Partner cash flows, and this blended return may differ from that of individual Limited Partners. As a result, certain funds may generate accrued performance revenues with a blended Net IRR that is below the preferred return hurdle for that fund. Subtotal Net IRR aggregations for multiple funds are calculated based on actual cash flow dates for each fund and represent a theoretical time-weighted return for a Limited Partner who invested sequentially in each fund.

(7)    Represents the net accrued performance fee balance/(giveback obligation) as of the current quarter end.

(8)    For funds marked “NM,” IRR may be positive or negative, but is not considered meaningful because of the limited time since initial investment and early stage of capital deployment. For funds marked “Neg,” IRR is considered meaningful but is negative as of reporting period end.

(9)    Aggregate includes the following funds, as well as all active co-investments, separately managed accounts (SMAs), and stand-alone investments arranged by us: SASOF IV, SASOF V, CALF and CICF.

(10)    Aggregate includes the following funds, as well as related co-investments, separately managed accounts (SMA's), and certain other stand-alone investments arranged by us: CSP I, CEMOF I, CSC, CMP I, CMP II, SASOF II, and CASCOF.

(11)    The fund stepdown date represents the contractual stepdown date under the respective fund agreements for funds on which the fee basis stepdown has not yet occurred. Funds without a listed Fee Initiation Date and Stepdown Date have not yet initiated fees.

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(12)    All amounts shown represent total capital commitments as of December 31, 2022. Certain of our recent vintage funds are currently in fundraising and total capital commitments are subject to change. Committed Capital for CEMOF II reflects original committed capital of $2.8 billion, less $1.1 billion in commitments which were extinguished following a Key Person Event.

Global Investment Solutions

The following table presents our results of operations for our Global Investment Solutions(1) segment:

(1) On April 1, 2021, we closed on the sale of our interest in Metropolitan Real Estate (“MRE”). Distributable Earnings and Fee Related Earnings attributable to MRE in periods prior to the sale were immaterial to the Global Investment Solutions segment. The $5.0 million gain on the sale and the $26.8 million right-of-use asset impairment, as a result of the sublease transaction (see Note 10 to the consolidated financial statements in Item 8 of this Annual Report on Form 10-K), are not included in DE or FRE. See “Non-GAAP Financial Measures” for the reconciliation of Total DE and FRE to the U.S. GAAP financial statements.

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 and Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Distributable Earnings

Distributable earnings decreased $14.2 million for the year ended December 31, 2022 as compared to 2021, and increased $60.7 million for the year ended December 31, 2021 as compared to 2020. The following table provides the components of the change in distributable earnings for the years ended December 31, 2022 and 2021:

Realized Net Performance Revenues. Global Investment Solutions had realized performance revenues of $192.6 million, $186.8 million and $155.1 million for the years ended December 31, 2022, 2021 and 2020, respectively. However, most of these realizations are from AlpInvest fund vehicles in which we generally do not retain carried interest. Therefore, our realized net performance revenues were $23.2 million, $18.7 million and $10.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. As funds that have launched since our acquisition of AlpInvest in 2011 begin to realize performance revenues, which will not occur until all capital contributions for investments and expenses and the preferred return hurdle have been returned, an increasing share of net realized performance revenues will be for our benefit.

Realized Principal Investment Income. Realized principal investment income decreased $6.0 million for the year ended December 31, 2022 as compared to 2021 and increased $7.5 million for the year ended December 31, 2021 as compared to 2020, primarily due to investments in our secondary funds.

Fee Related Earnings

Fee related earnings decreased $14.9 million for the year ended December 31, 2022 as compared to 2021, and increased $46.9 million for the year ended December 31, 2021 as compared to 2020. The following table provides the components of the change in fee related earnings for the years ended December 31, 2022 and 2021:

Fee Revenues. Total fee revenues decreased $6.0 million for the year ended December 31, 2022 as compared to 2021, primarily due to the negative impact of foreign currency translation and the sale of MRE in April 2021, partially offset by management fees in our latest coinvestment fund, which activated fees in the second quarter of 2021.

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Total fee revenues increased $35.8 million for the year ended December 31, 2021 as compared to 2020, primarily due to increased management fees driven by the activation of management fees on our latest secondaries fund in the second quarter of 2020 and our latest coinvestment fund in the second quarter of 2021, as well as $4.4 million in catch-up management fees. These increases were partially offset by the impact of the sale of MRE on April 1, 2021, which resulted in a $15.9 million decrease in management fees.

Cash-based compensation and benefits expense. Cash-based compensation and benefits expense increased $3.5 million for the year ended December 31, 2022 as compared to 2021, primarily due to an increase in cash bonuses, partially offset by a decrease in cash-based compensation and benefits expense as a result of the MRE sale.

Cash-based compensation and benefits expense decreased $5.3 million for the year ended December 31, 2021 as compared to 2020, primarily as a result of the MRE sale on April 1, 2021, partially offset by an increase in cash bonuses.

General, administrative and other indirect expenses. General, administrative and other indirect expenses increased $4.8 million for the year ended December 31, 2022 as compared to 2021, primarily due to higher professional fees and travel and other general expenses.

General, administrative and other indirect expenses decreased $9.1 million for the year ended December 31, 2021 as compared to 2020, excluding the impact of litigation cost recoveries in 2020, primarily due to the sale of MRE.

Fee-earning AUM as of and for each of the Three Years in the Period Ended December 31, 2022

Fee-earning AUM is presented below for each period together with the components of change during each respective period.

The table below breaks out Fee-earning AUM by its respective components during the period.

(1)For additional information concerning the components of Fee-earning AUM, see “—Fee-earning Assets under Management.”

(2)Includes amounts committed to or reserved for certain funds.