David Rubenstein SuperReturn 2014 Public

7/23/2019 David Rubenstein SuperReturn 2014 Public

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We Hold These Truths To Be Self-Evident

David M. Rubenstein

Co-Founder & Co-Chief Executive Officer

February 26, 2014


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Important Information

This presentation has been prepared by The Carlyle Group L.P. (Carlyle) and may only be used for informational purposes only. This

presentation provides an overview of Carlyle and is not intended to be taken by, and should not be taken by, any individual recipient as

investment advice, a recommendation to buy, hold or sell any security, or an offer to sell or a solicitation of offers to purchase any security. An

offer or solicitation for an investment in an investment fund managed or sponsored by Carlyle or its affiliates (Fund) willoccur only through an

offering memorandum and related purchase documentation, and subject to the terms and conditions contained in such documents and in theFunds operative agreements.

By accepting this presentation, the recipient agrees that it will, and will cause its representatives and advisors to, use the information contained

herein for informational purposes only. Recipient also agrees that neither this presentation nor the information contained herein may be

copied, disclosed or provided, in whole or in part, to third parties without the prior written consent of Carlyle. This presentation may not be

referenced, quoted or linked by website, in whole or in part except as agreed to in writing by Carlyle.

Certain information contained in this presentation has been obtained from published and non-published sources prepared by other parties,

which in certain cases have not been updated through the date hereof. While such information is believed to be reliable for the purpose used

in this presentation, Carlyle does not assume any responsibility for the accuracy or completeness of such information and such information

has not been independently verified by Carlyle. Except where otherwise indicated herein, the information provided in this presentation is based

on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect

information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof. References to portfolio

companies are presented to illustrate the application of Carlyles investment process only and should not be considered a recommendation of

any particular security or portfolio company. Information about recommendations over the last year is available upon request. It should not be

assumed that recommendations made in the future will be profitable or will equal the performance of past recommendations.

Statements contained in this presentation that are not historical facts are based on current expectations, estimates, projections, opinions

and/or beliefs of Carlyle. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be

placed thereon. Certain information contained in this presentation constitutes forward-looking statements, which can be identified by the use

of forward-looking terminology such as may, will, should, seek, expect, anticipate, forecast, project, estimate, intend, continue,

target, or believe or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties,

actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. None of Carlyle or any

of its Funds or representatives makes any assurance as to the accuracy of those predictions or forward looking statements. Carlyle expressly

disclaims any obligation or undertaking to update or revise any such forward-looking statements.


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What happened in theprivate equity industry in 2013?

3


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Largest fundraising

volume since the GreatRecession

970 funds were raised

Record average fund

size of $555 million1

Funds raised bygeographic focus:

North America 63%

Europe 23% Asia 9%

Rest of World 4%

4

Global Private Equity Fundraising Volume Was Up 26% In 2013 ButRemains 30% Below The 2008 Peak

$688

$320$294

$332

$384

$485

$0

$100

$200

$300

$400

$500

$600

$700

$800

2008 2009 2010 2011 2012 2013

Global Private Equity Fundraising Volume

($ billions)

Source: Preqin

Source: Preqin. There is no guarantee these trends will continue.1 Average fund size calculated for funds with available fund size data. Fund size data is not available for all 970 fundsraised in 2013 so dividing the aggregate fundraising volume by 970 funds does not equal the average fund size raised.


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Largest deal volume

since the GreatRecession

Average purchase pricemultiple of 8.8x

Average leveragemultiple of 5.4x

Deal volume bygeographic focus:

North America 59% Europe 28%

Asia 8%

Rest of World 5%

5

Global Private Equity Deal Volume Was Up 15% In 2013 But Remains 50%Below The 2006 Peak

$785 $781

$253

$134

$252

$321 $337

$389

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

2006 2007 2008 2009 2010 2011 2012 2013

Global Private Equity Deal Volume

($ billions)

Source: PreqinSource: Thomson One & S&P Leveraged Commentary Data, Q4 2013 Update. There is no guarantee these trends willcontinue.


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Second highest exit

volume on record Record ~1,350 exits

Exit count by type:

Trade sale 51%

Sale to GP 26%

IPO 19%

Restructuring 3%

2013 matched 2010 for

record 19% of exits viaIPO

6

Global Private Equity Exit Volume Was 14% Above The 2007 Pre-GreatRecession Peak

$163

$266

$116

$81

$222

$313

$285$303

$0

$50

$100

$150

$200

$250

$300

$350

2006 2007 2008 2009 2010 2011 2012 2013

Global Private Equity Exit Volume

($ billions)

Source: PreqinSource: Preqin. There is no guarantee these trends will continue.


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Purchase Price Multiples & Equity Contributions Are Generally Back ToPre-Great Recession Levels

Source: S&P Leveraged Commentary Data, Q4 2013 Update. 7

8.4x 8.4x

9.7x

9.1x

7.7x

8.5x8.8x 8.7x 8.8x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

2005 2006 2007 2008 2009 2010 2011 2012 2013

LBO Purchase Price Multiples

32%33% 33%

43%

51%

44%42%

39%37%

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009 2010 2011 2012 2013

LBO Equity Contributions


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Self-evident truths aboutthe private equity industry

8


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Emerging markets have emergedand will increasingly play a larger

role in private equity

9


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Emerging Markets Now Account For More Than Half Of Global GDP

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Emerging Markets Share Of Global GDP

10Source: Carlyle Analysis of IMF Data as of 12/31/13.

2013=54%

2004=38%

Emerging markets account for~85% of the global populationtoday vs. only 68% in 1950

Emerging markets are expectedto account for more than half

of global GDP growth from2013 to 2018


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Emerging Markets Have Increased As Both A Source Of And DestinationFor Private Equity Capital

Source: Thomson One & Preqin Private Equity Quarterly. 11

5%

13%

0%

2%

4%

6%

8%

10%

12%

14%

2002 2013

Rest-of-World (Ex. North America

& Europe) Share of Deal Value

11%

20%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2006 2012

Rest-of-World (Ex. North America

& Europe) Share of CapitalCommitments


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Emerging Markets Are Still Relatively Under-Penetrated By Private Equity

Source: Emerging Markets Private Equity Association Q4 2013 Industry Statistics. 12

1.03% 1.04%

0.24%0.19% 0.20%

0.09% 0.09% 0.04% 0.09%0.05%

1.02%

0.89%

0.28% 0.20%

0.13%0.12%

0.07%0.06%

0.04% 0.01%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

US UK S. Korea India Brazil SSA China S. Africa Japan MENA

Private Equity Investment As A % of GDP


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Sovereign wealth funds will become the

largest single source of capitalfor private equity firms, replacing

U.S. public pension funds

13


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SWF Assets Have Increased By More Than $4 Trillion In Less Than A DecadeAnd Are Projected To Grow Faster Than U.S. Public Pension Fund Assets

Source: 2014 Preqin Sovereign Wealth Fund Review and PWC Asset Management 2020: A Brave New World. There is noguarantee these trends will continue. 14

$1.4

$5.4

$8.9

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

$10.0

2004 2013 2020P

Sovereign Wealth Fund Assets Under Management ($ trillions)


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Sovereign Wealth Funds Have Quadrupled Their Share Of Commitments ToPrivate Equity Funds Since 2010

SWFs

3%

All Other

Investors

97%

2010

Source: Dow Jones Private Equity Analyst Sources of Capital Survey, 5/29/13. There is no guarantee these trends will continue. 15

SWFs

13%

All Other

Investors

87%

2013

% of Total Commitments To Private Equity Funds


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Individual investors (including non-accreditedinvestors) will become a larger part of the

private equity investor base

16


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Mass Affluent Assets Under Management Are Larger And Faster GrowingThan High Net Worth Assets Under Management

Source: PWC Asset Management 2020: A Brave New World. 17

$42

$60

$100

$-

$20

$40

$60

$80

$100

$120

2004 2012 2020P

Mass Affluent AUM

($100k - $1mm net worth)$ trillions

$38

$52

$77

$-

$20

$40

$60

$80

$100

$120

2004 2012 2020P

High Net Worth AUM

($1mm+ net worth)$ trillions


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US Retirement Plans Alone Have $20 Trillion In AUM

Source: Investment Company Institute Fact Book 2013. There is no guarantee these trends will continue.18

$3

$5$3

$5$6

$9

$11

$20

$-

$5

$10

$15

$20

$25

2002 2012

Total Value of US

Retirement Plans ($ trillions)

IRAs Defined Contribution Plans Other (Incl. Defined Benefit Plans)


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Individual Investors Have Almost Doubled Their Share Of CapitalCommitments To Private Equity In Just The Past Few Years

Source: 2014 Preqin Global Private Equity Report. There is no guarantee these trends will continue. 19

10%

19%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

2008-2010 2011-2013

Industry-Wide % of Capital Committed by

High Net Worth Individuals & Family Offices


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Returns will continue to comedown but private equity will still

outperform public equities

20


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Returns Have Come Down Over The Past 20 Years

Source: Cambridge Associates LLC U.S. Private Equity Index and Selected Benchmark Statistics. As of 9/30/13. Excludesvintages with less than 3 years of performance. 21

0%

5%

10%

15%

20%

25%

30%

35%

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

U.S. Private Equity Fund Pooled Net IRR By Vintage

Median = 15%


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8% 8%7%7%

11% 11%

13%

26%29%

0%

5%

10%

15%

20%

25%

30%

5-Year 10-Year 20-Year

Buyout Fund Net Returns vs. Public Equity Total Returns

(5-,10-, & 20-year net returns)

MSCI World Index All Buyout Funds Top Quartile Buyout Funds

But Top Quartile Private Equity Funds Have Significantly OutperformedPublic Equities Over A Variety Of Time Horizons

22Source: Cambridge Associates, Thomson One Financial as of 9/30/13. There is no guarantee these trends will continue.


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Private Equitys Focus On Value Creation Will Drive Outperformance

Source: Goldman Sachs, BCG-IESE estimate. 23

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%100%

Leverage Era (1980s) Multiple Expansion Era

(1990s)

Earnings Growth Era

(2000s)

Operational

Improvement (2010s)

Source of Value Creation

Operational Improvement Multiple Arbitrage Leverage


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Allocations to private equitywill continue to increase

24


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18%

8% 9%

5%4%

3%

28%

13%12%

6% 6%

3%

0%

5%

10%

15%

20%

25%

30%

Family Offices Endowments Foundations Public Pension

Funds

Private Sector

Pension Funds

Insurance

Companies

Private Equity Allocation as a Percent of Total Assets

2009 2013

Source: 2013 Preqin Investor Network Global Alternatives Report & Preqin 2014 Global Private Equity Report. There is noguarantee these trends will continue. 25

Allocations To Private Equity Have Gone Up Across-The-Board


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Almost 40% Of Investors Are Below Their Target Allocation To PrivateEquity And Almost 40% Of Investors Plan To Increase Their Allocation

Source: 2014 Preqin Global Private Equity Report. 26

39%

44%

18%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-13

Proportion of Investors Relative

To Their Target Allocation

Above Target Allocation

At Target Allocation

Below Target Allocation

36%

53%

10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Dec-13

Investors Intentions for Private

Equity Allocations

Increase Allocation

Maintain Allocation

Decrease Allocation


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The private equity industry will be seen asmainstream rather than alternative

27


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Private Equity AUM Has Grown At A 20% CAGR Since 1980 AndNow Stands At $3.5 Trillion

$0.0 $0.0 $0.1 $0.1 $0.1$0.1 $0.1 $0.1

$0.2$0.3

$0.4

$0.7 $0.8 $0.8

$0.9$1.0

$1.2

$1.7

$2.3 $2.3

$2.5

$2.8

$3.0

$3.3

$3.5

$-

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

$4.0

1980199019911992199319941995199619971998199920002001200220032004200520062007200820092010201120122013

Global Private Equity AUM ($ trillions)

Source: PreqinSource: 2013 Preqin Investor Network Global Alternatives Report and McKinsey. 28


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Alternatives Have Doubled Their Share Of Total Asset Management AUMIn Just The Past Decade

Alternatives AUM is $6 trillion today vs. $2 trillion a decade ago (14% CAGR)

Asset management AUM is $62 trillion today vs. $38 trillion a decade ago (6% CAGR)

Source: BCG Global Asset Management 2013 Report: Capitalizing On The Recovery. There is no guarantee these trends willcontinue. 29

5%

10%

0%

2%

4%

6%

8%

10%

12%

2003 2012

Alternatives AUM As A % Of Total Asset Management AUM


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Public firms will become more common;larger firms will get a greater

share of commitments

30


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Seven Private Equity Firms Have Gone Public Since 2007

Note: Year respective firm went public. Presented for illustrative purposes only. 31

(2007)

(2007)

(2007)

(2010) (2011)

(2012)(2012)

I A I i C i T Gl b l Al i A


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Investors Are Increasing Commitments To Global Alternative AssetManagers

Driving Factors

Stability

Consistency of returns

Brand

Size

Transparency

Global Presence

Value Added

Public Visibility

Source: Preqin. Industry fundraising includes Buyout, Growth, Real Estate, Natural Resources, Mezzanine, Distressed, Early/Venture,

Balanced, , Special Situation, Timber, and Turnaround. Represents the rolling 3-year average market share of The Carlyle Group &US publicly traded peers relative to overall industry wide fundraising. There is no guarantee these trends will continue. 32

6.8%

10.9%

2006 2013

Market Share of Fundraising (3-year

rolling average) of publicly traded

alternative asset managers as a % oftotal industry fundraising1


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Private equity firms will continue to diversifytheir product offerings

33

T d N C t P i t E it A t M k U A L Sh Of


34/43

Today Non-Corporate Private Equity Assets Make Up A Larger Share OfPublicly Traded Alternatives Firms AUM

Source: SEC Filings. Calculated as the median of non-corporate private equity assets / total assets for Carlyle, Blackstone,Apollo, KKR, & Oaktree. Calculated as of each companys respective IPO date and 9/30/13. 34

47%

66%

0%

10%

20%

30%

40%

50%

60%

70%

IPO Q4 2013

Median Non-CPE Assets As A % Of Total AUM


35/43

Interest rates will rise but cheap creditwill be readily available

35

N B k L d P id A Si ifi t M j it Of Th T Of L


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0%

25%

50%

75%

100%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Bank vs. Non-Bank Share of Highly Leveraged Loans

Banks Non-Banks

Banks (14%)

Non-Banks (86%)

Source: S&P LCD Quarterly Q4 2013. Non-banks include: institutional investors, insurance companies, and finance companies. 36

Non-Bank Lenders Provide A Significant Majority Of The Types Of LoansUsed In Private Equity Transactions

I t t C t F C t B H T Ri 200 B i P i t J t


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Interest Costs For Corporate Borrowers Have To Rise 200 Basis Points JustTo Reach Pre-Great Recession Levels

Source: St. Louis Federal Reserve. B-Rate Corporate Spread represents BofA Merrill Lynch US High Yield B Option-AdjustedSpread. 37

4.4%

1.2%

3.3%

4.5%

7.7%

5.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

2005-2007 2013

Avg. 5 Year Treasury Avg. B-Rated Corporate Spread


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Europe will be the market of focus in 2014

38


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Europes Economy Has Reached The Bottom

GDP: ~$17 trillion

The European Union economy accountsfor nearly one-quarter of the globaleconomy

Growth of just 1.2% will add more than$750 billion to global GDP. This is thesame contribution to global GDP that

China generates by growing at 8.5%.

Spain was the biggest upside surprise in2013 of all economies. Instead ofcontracting at a 1.2% rate as forecast bythe IMF, Spanish GDP was flat, withgrowth strengthening throughout the

year and exceeding 1% in Q4-2013.

Germany has the largest current accountsurplus in the world, exceeding China,thanks to manufacturing export growth

Source: U.S. Bureau of Economic Analysis. 2014 & 2015 Projections from IMF January 2014 World Economic Outlook Update. 39

3.0%

0.4%

-4.4%

2.0%1.6%

-0.7%-0.4%

1.0%1.4%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

Euro Zone GDP Growth Rate


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Europes Share Of Private Equity Investment Has Unduly Declined

Source: Thomson One. 40

39%

46%

51% 52%

44%

48%

34% 33%

48%

32%36%

31%

23%

28%

0%

10%

20%

30%

40%

50%

60%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

European Private Equity Deal Volume As A

Percent Of Total Private Equity Deal Volume


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European Assets Are Priced At A Substantial Discount

Source: S&Q Capital IQ, Bloomberg EEO. 1. FTSE 100, DAX 30, CAC 40, AEX, Ibex 35, FTSE MIB; arithmetic mean. The EBITDAmultiples and financial indices referenced herein as benchmarks are provided for informational purposes only.

US & European EBITDAMultiples, 2010-20131

EBITDA Multiples on Major Stock MarketIndexes as of 1/12/13

41

5.00x

6.00x

7.00x

8.00x

9.00x

10.00x

11.00x

European Avg U.S. Value-Weighted

12.3x

7.3x

8.1x

10.1x

9.1x 9.3x 8.9x8.0x

7.7x

8.2x

6.2x

0.00x

2.00x

4.00x

6.00x

8.00x

10.00x

12.00x

14.00x European Average: 7.8xR.O.W. Average: 9.4x

EBITDA

Multiple 8.2x

7.6x

7%

23%

10.1x

7.8x


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Truths That Will Become More Self-Evident In The Future

Private equity enhances the value of companies and generally preventsjob loss

Private equitys high returns will increasingly be sought by and madeavailable to non-accredited investors

Current regulations of the private equity industry provide appropriate

oversight and protection

Private equity cannot appropriately be seen as a source of systemic risk

Private equity will continue to have one of the best risk-return profiles of

any area in money management

Governments should welcome private equity investment and the growthof the private equity industry in their country

42


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Bonus Truths:

100% of private equity funds willcontinue to be in the top quartile

All private equity firms willcontinue to avoid participation in any auction

The new name for the

private equity industry will be

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David Rubenstein SuperReturn 2014 Public