Curtis Buser: So Craig, I am very optimistic. Let’s just start with solutions. Solutions pre ’21 or so was — for 5 years, was averaging about $30 million or so in fee-related earnings, had a very successful fundraise and growth in that business and stair-stepped up essentially doubled initially to $80 million. We’re now in the $70 million or $69 million in ’22 for fee-related earnings. It does everything that I’m expecting it to do. I see it doubling again. It won’t double in ’23, but I think, in ’24, that business can double. We’re very bullish on what our credit business can do. And we think with both product that we can really drive, hopefully, another doubling of that business won’t be again in ’23. It’s going to take us some time.
But we really kind of think that we can kind of make some real progress there. And that’s off the back of continuing to build out our capital markets business, which, by the way, I had zero exposure on my balance sheet in terms of hung deals or bad things. So really, really proud of our team and capital markets in terms of how they’ve operated and operated in a very smart way. We talked about Fortitude and what it can do. And look, just the strength across the rest of the structured credit as well as a number of new products. And don’t forget our opportunistic credit business, which is very bullish and is going strong. So there’s a lot of great things in credit and in private equity. Look — still remain interested in kind of what we can do outside of traditional buyout, which — look, I actually think our buyout business is amongst one of the best.
And with a little bit of good news in some places, we’ll be right back to kind of doing what it’s always done and think that we’re well set up for real progress there. And then you just think real estate has just a phenomenal track record. It can add to the picture and see much further growth in real estate. It’s too early to really call out kind of what can happen in energy. And — but I think in infrastructure, you got a nice upside lift kind of there. It will take some time, but it’s a nice upside lift. And so I think across the platform, lots of great things and looking forward to what we can collectively do as a team going forward.
Daniel Harris: Craig, I think as you referenced the term super cycle, as we’ve continued to pursue this diversification strategy we’ve been on for quite some time, that term has less and less meaning for us. Yes, we raised closed-end funds. But if you look at the number of significantly large funds across our platform in every different business, we’re going to raise significant amounts of capital in every year. And then you add on all the things that Curt mentioned outside of what we had several years ago, whether that’s Fortitude or opportunistic credit or open-ended products. And we see opportunities to raise a lot of capital, which gives us conviction and confidence that we’re going to be able to grow FRE in a very substantial way over time.
And just to reiterate what we said during our prepared remarks, we’ve grown FRE at 34% CAGR over the past 5 years, and that’s not an accident. It’s because of this process. And as we look forward, we’re very hopeful, and we have a lot of confidence that we’re going to be able to deliver great results too.
Operator: Our next question comes from Michael Cyprys from Morgan Stanley.
Michael Cyprys: Maybe just circling back to some of the fundraising commentary just as you guys are out on the road meeting with LPs. I was hoping you might be able to comment on pricing trends. To what extent have fees and pricing come up in your discussions with LPs? How are overall economics evolving on the newer slate of funds relative to the predecessor funds? When you look across management fees, discounts for size, recycling provisions, step-downs, reimbursement for expenses, all of those sort of pieces, what sort of changes, if any, are you seeing in the marketplace?
Curtis Buser: Michael, it’s Curt. I don’t think that we’re seeing anything significant one way or the other as we are on the road talking to people. It’s — the stuff that was always kind of the case still remains the case, which is access to co-investment and the like. And so that’s really where more of the discussions really go as we’re talking to LPs and fundraising.
Michael Cyprys: And maybe just a follow-up to that, maybe more on the portfolio company side, just around performance, revenue, EBITDA growth trends. Maybe you can just give a little bit of commentary there. What are you seeing, margin trends, inflationary pressures, tight labor conditions? How is the portfolio adapting to the sort of backdrop? And if you’re able to quantify any of that, that would be helpful, too.
Curtis Buser: Look, the portfolio grew really nicely first half of the year, in particular. The rate of growth decreased second half of the year but was still growing. So over ’22 EBITDA was growing, I want to say, on average about 10%, particularly over the Corporate Private Equity, broadly speaking, portfolio. And so optimistic around kind of what that can continue to do. Across many of the businesses, we saw continued pricing power that enabled that to occur, to be seen in terms of how strong that pricing power continues and kind of inflationary pressure and how that works against us. And then — but the good news is, I will say that the way we’ve constructed the portfolios, we’re generally in good shape. So again, cash flowing businesses, real estate is not in the bad areas. So almost nothing in office or hotel or retail. So again, very good construction across both our private equity, inclusive of real estate.
Operator: Our next question comes from Gerry O’Hara with Jefferies.
Gerald O’Hara: We’ve covered a fair amount of ground here this morning. But maybe just kind of touching base on the expense side and clearly saw a pretty meaningful step-up in G&A year-over-year. Obviously, a lot of growth initiatives going on investing in the business. But perhaps, Curt, if you could give us a little sense of how to think about that as we look to the next 12 to 24 months?
Curtis Buser: Thanks, Gerry, for the question, and good to hear from you. Look, in a year where I can grow FRE 40% over the prior year, I’ll take it however I can get it. And if that means investing in the business, that’s a great outcome to generate 40% FRE margin. With respect to cash and with respect to G&A, if you look at it on a quarterly basis, Q4 versus Q4, pretty much flat. Yes, on an annual basis up. But I actually think that we’re very focused on — I know that we’re very focused on managing costs and managing where we deploy our excess expenditures, and it’s really around investing in new product development, in distribution and investing for the future. There are clearly things that we’re making investments in that will benefit us ’24, ’25, ’26 to enable long-term growth, and things like retail and private wealth really matter for that, less so in terms of what it does to ’23 FRE.
Operator: Our next question comes from Brian Bedell, Deutsche Bank.
Brian Bedell: Most of my questions have been asked and answered as well. But I just want to come back to the — actually to Investor Day targets that you laid out in ’21. You’re tracking ahead of those targets already with the exception of FRE, which I guess you’re on the way towards given its 40% target for 2024. But just wanted to get your conviction around reaching that level? Or is that going to be more of a Harvey decision in terms of potential new investments that you might be making and rather — you’d rather just focus, like you said, on FRE growth?
