Brian Mckenna: Great. So realizations have been pretty resilient despite the tough backdrop I’m curious what parts of your portfolio are you most active monetizing today? And then it might be tough to answer, but what’s the base case expectation for realizations in 2023, assuming no material shift in the backdrop? Do you think you can get back to that $1 billion level again?
Curtis Buser: So Brian, it’s a great question. And I always like policy my crystal ball to fine-tune this as best I can. A year ago, in the fourth quarter of 2021, we earned about $700 million in net realized carry off of a very strong realization period. And that was like not only impossible to forecast and predict until kind of as it was happening, it also shows the power of what can occur in a single quarter. So we’re sitting here today with $4 billion of net accrued carry on the balance sheet. Our underlying portfolio of $138 billion of fair value is up 10% from a year ago. So the portfolio is incredibly well positioned to continue to drive significant realizations for our LPs and carried interest for us. Now exact timing of that, look, it’s going to be second half of the year.
Now good news is there’s some smaller, midsized transactions occurring as we speak that gives me a lot of confidence. But the big stuff that will really drive it will be more in the back half of the year. And keep in mind, you actually sign up a transaction, and it takes often a couple of quarters to actually close the transaction. And so the level of announced transaction is far lower today than say, a year ago. And so therefore, it’s going to be the back half of the year.
Kenneth Worthington: Helpful. And then just with respect to CP VII, gross returns of the fund total 14% or 8% on a net basis. So how are you thinking about returns for this fund as it continues to mature over time? And then if you look back historically, what’s the average markup on realized investments relative to the prior unrealized marks?
Curtis Buser: So I would be very careful in terms of — we have funds that are in fundraising. To talking about specifics and forward stuff is complicated on a call like this. But let me give you some high-level thinking. First, our current generation of buyout funds are generally in the same position as their predecessor funds, which all did exceptionally well. And really, I’m optimistic in terms of where this fund and the similar vintage funds will continue to perform and do, just as I said, with respect to carry. So I think we’re well set up for this. And keep in mind, our portfolio construction, whether it’s in private equity or real estate or credit, is very diversified. And we tend to invest in good assets where we have deep industry experience and knowledge, where we understand the macro environment where they’re operating in.
And most of our value creation comes from driving revenue and driving earnings. It’s generally not, hey, we figure out how to buy low sell high. It’s generally not kind of — boy, we can turn this business around because we’re smarter than everybody else. We bring tools to add to revenue, add to profitability, and that’s what it turns in the success.
Operator: Our next question comes from Rufus Hone with BMO.
Rufus Hone: I wanted to come back to some of the comments you made around the FRE growth trajectory. I guess could you give us a better sense of when you anticipate getting into the double-digit growth rate you mentioned in the prepared remarks. And do you think you can get to double digits organically? Or is that dependent on inorganic growth?
Curtis Buser: Rufus, thanks. Look, we can definitely get double-digit organically where — the business is growing fast and it’s very possible that we’ll get there in ’23, but I would say, it’s on the lower side of that, and it really depends upon activity levels. Transaction fees can be a big help. Transaction fees, essentially, if you look on detail while 2022 was up over ’21 and was our best year ever on transaction fee revenues. And from Q2, it kind of peaked and came down in Q3 and came down in Q4, which put a downward pressure on fee-related earnings. I think they’re — it’s going to remain like in the first quarter or so. And then as they pick back up, that will be a big help. In addition, there’s a number of things that we think will also turn on later in the year.
And keep in mind, our credit business generally generates fees off of invested capital. So as we raise capital in that business and raised a lot of money in 2022, as it deploys, we get the benefit of that. And so there’s a built-in lag between fundraising and fee generation, in particular, in that business. So hopefully, that gives you some color.
Daniel Harris: And I would just add, Rufus, as we said during our remarks, we continue to invest in new product development and distribution. And that’s across the platform and we noted that, that’s in the private wealth channel as well. So those are things that should help us drive organic new growth over time in addition to, of course, inorganic opportunities that show up and all the things that Curt just mentioned.
Operator: Our next question comes from Craig Siegenthaler with Bank of America.
Craig Siegenthaler: And we just want to congratulate you on naming a top-notch CEO.
William Conway: Thank you.
Craig Siegenthaler: So we wanted to start with an update on fundraising for the flagship PE funds starting with CPA. I think there are a number of large LPs that wanted to wait until 2023 when their annual deployment allocations were reset before they committed to 8. I just want to see how this is playing out now that we’re more than a month into 2023?
Curtis Buser: Craig, it’s really too early and I really don’t like to talk about details on a given fund, but remain optimistic in terms of where all of our fundraising can turn out. And as we said, I think we’re going to raise more money this year than we did last year.
Craig Siegenthaler: Got it. And just as my follow-up. A big question for us is the long-term growth trajectory. And I know there’s not a ton you can say on this, but when you wrap up your fundraising super cycle with Asia 6 and Europe 6 this year and start to exit the cycle, can you talk about the potential for FRE growth to decelerate and help us kind of with this risk really framing into ’24? And I think it really comes down to the dynamic of can you raise enough capital in insurance solutions and credit to offset the net realizations that your private business will generate?
