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Carlyle's Conway sees prolonged period of weakness for energy prices

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Carlyle's Conway sees prolonged period of weakness for energy prices

Notwithstandinga recent rally, a reality is starting to set in that energy prices will remainfairly low for the foreseeable future, according to a top executive.

Co-CEOand Chief Investment Officer William Conway Jr. during an earnings conferencecall acknowledged the sharp upward move in crude oil prices that started latein the first quarter but said the spike would not result in commodities pricesreturning to high levels. Instead, the market is starting to cometo the realization that the prices are going to stay low for a lot longer.

"Ithink a lot of hope isdriving decision-making … hope that the market would start to come back, itcould hang on, and then they would benefit from that," Conwaysaid. "There is now becoming far greater realization that that is notwhat's going to happen."

Carlylereported first-quarter net income attributable to the company of $8.4 million,or 1 cent per common unit, compared with $39.5 million, or 54 cents per unit, ayear earlier. Pretax economic net income was $88.5 million, down from $272.7million in the first quarter of 2015. Total revenues slid year over year to$483.1 million from $1.14 billion due in large part to a significant decline inperformance fees, which fell to $145.2 million from $573.0 million.

Carlyle'sassets under management have declined steadily over the last several quarters,but its fee-earning AUM rose year over year. CFO Curtis Buser said on the callthat there are several "inherent pressures" in Carlyle's portfolioleading to the slide in total AUM, pointing to hedge fund redemptions and the"burn off" of legacy energy funds such as . Riverstone alonehas about $5.8 billion that will run off Carlyle's portfolio, Buser noted.

Itis not difficult to grow AUM if one is willing to take on less profitableassets, said co-CEO David Rubenstein. But Carlyle is uninterested in going thatroute.

"We'renot adding AUM for the sake of adding AUM," he said.

Carlyleexecutives in the past stressed that, for instance, the economics in the newenergy vehicles it put into place after cutting ties with Riverstone are muchbetter than what it had in the past. The alternative asset manager had $56.6billion in total dry powder as of the end of the first quarter, comprised of$23.1 billion in corporate private equity, $15.4 billion in real assets, $13.3billion investment solutions and $4.7 billion in global market strategies.