Carlyle Group: Raising Fair Value Estimate on Improved Market Conditions and Compensation Changes

We've increased our fair value estimate for narrow-moat-rated Carlyle Group to $48 per share from $32 to account for revised near-term expectations for assets under management, or AUM, revenue, and profitability since our last update. While some of the increase in valuation was due to the recovery in the equity and credit markets, much of it was due to changes management made to the firm's compensation structure, with the firm moving some of its cash-based compensation over to performance revenue-related compensation. This puts the firm in a much better position than we expected coming into 2024, allowing us to raise our fair value estimate 50%.