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Investments
 9 Months Ended
Sep. 30, 2020
Investments [Abstract]  
Investments
4. Investments
Investments consist of the following: 
 As of
 September 30, 2020December 31, 2019
 (Dollars in millions)
Accrued performance allocations$4,184.2 $3,855.6 
Principal equity method investments, excluding performance allocations1,699.4 2,443.6 
Principal investments in CLOs and other600.6 505.2 
Total$6,484.2 $6,804.4 
Accrued Performance Allocations
The components of accrued performance allocations are as follows:
 As of
 September 30, 2020December 31, 2019
 (Dollars in millions)
Corporate Private Equity$2,820.2 $2,107.5 
Real Assets523.1 764.4 
Global Credit86.5 136.9 
Investment Solutions (1)
754.4 846.8 
Total$4,184.2 $3,855.6 
(1) The Company’s primary and secondary investments in external funds are generally valued based on its proportionate share of the net assets provided by the third party general partners of the underlying fund partnerships based on the most recent available information which typically has a lag of up to 90 days.  As a result, amounts presented may not include the impact of economic activity in the current quarter.
Approximately 40% and 26% of accrued performance allocations at September 30, 2020 and December 31, 2019, respectively, are related to Carlyle Partners VI, L.P., one of the Company’s Corporate Private Equity funds.
Accrued performance allocations are shown gross of the Company’s accrued performance allocations and incentive fee-related compensation (see Note 6), and accrued giveback obligations, which are separately presented in the unaudited condensed consolidated balance sheets. The components of the accrued giveback obligations are as follows:
 As of
 September 30, 2020December 31, 2019
 (Dollars in millions)
Corporate Private Equity$(0.6)$(5.0)
Real Assets(16.9)(17.2)
Total$(17.5)$(22.2)
Principal Equity Method Investments, Excluding Performance Allocations
The Company’s principal equity method investments (excluding performance allocations) include its fund investments in Corporate Private Equity, Real Assets, Global Credit, and Investment Solutions, typically as general partner interests, and its strategic investments in Fortitude Re (included within Global Credit) and NGP (included within Real Assets), which are not consolidated. Principal investments are related to the following segments:
 As of
 September 30, 2020December 31, 2019
 (Dollars in millions)
Corporate Private Equity$428.1 $420.1 
Real Assets582.7 601.7 
Global Credit646.4 1,299.6 
Investment Solutions (1)
42.2 122.2 
Total$1,699.4 $2,443.6 
(1) Principal equity method investments for Investment Solutions as of December 31, 2019 includes approximately $66.0 million related to certain entities which were deconsolidated during the nine months ended September 30, 2020.

Strategic Investment in Fortitude Re (f/k/a DSA Re)
On November 13, 2018, the Company acquired a 19.9% interest in Fortitude Group Holdings, LLC (“Fortitude Holdings”), a wholly owned subsidiary of American International Group, Inc. (“AIG”) (“the Minority Transaction”), pursuant to a Membership Interest Purchase Agreement by and among the Company, AIG and Fortitude Holdings, dated as of July 31, 2018 (the “2018 MIPA”). Fortitude Holdings owns 100% of the outstanding common shares of Fortitude Reinsurance Company Ltd., a Bermuda domiciled reinsurer (“Fortitude Re”, f/k/a “DSA Re”) established to reinsure a portfolio of AIG’s legacy life, annuity and property and casualty liabilities.
The Company paid $381 million in cash at closing of the Minority Transaction (the “Initial Purchase Price”) and expects to pay up to $95 million in additional deferred consideration following December 31, 2023. In May 2020, the Initial Purchase Price was adjusted upward by $99.5 million in accordance with the 2018 MIPA as Fortitude Holdings chose not to distribute a planned non-pro rata dividend to AIG prior to May 13, 2020. The Company paid $79.6 million of such adjustment in May 2020 and will pay the remaining $19.9 million following December 31, 2023.
On June 2, 2020, Carlyle FRL, L.P. (“Carlyle FRL”), a Carlyle-affiliated investment fund, acquired a 51.6% ownership interest in Fortitude Holdings from AIG (the “Control Transaction”) and T&D United Capital Co., Ltd. (“T&D”), a subsidiary of T&D Holdings, Inc., purchased a 25.0% ownership interest as a strategic third-party investor pursuant to a Membership Interest Purchase Agreement by and among the Company, AIG, Carlyle FRL, and T&D, dated as of November 25, 2019 (the “2019 MIPA”). At closing, the Company contributed its existing 19.9% interest in Fortitude Holdings to Carlyle FRL, such that Carlyle FRL holds a 71.5% interest in Fortitude Holdings. Taken together, Carlyle FRL and T&D have 96.5% ownership of Fortitude Holdings. Additionally, AIG agreed to a post-closing purchase price adjustment pursuant to which AIG will contribute to Fortitude Re an amount to cover certain adverse reserve developments in Fortitude Re’s property and casualty insurance business, based on an agreed methodology, that occur on or prior to December 31, 2023, up to $500 million.
The Company has a strategic asset management relationship with Fortitude Holdings pursuant to which Fortitude Holdings committed to allocate assets in asset management strategies and vehicles of the Company and its affiliates. If Fortitude Holdings fails to allocate an agreed upon amount of assets to the Company’s asset management strategies and vehicles within 30 to 36 months of the closing of the Minority Transaction, the Company may be entitled to certain payments from Fortitude Holdings based on the commitment shortfall and assumed customary rates.
Prior to the Control Transaction, the Company’s investment was accounted for under the equity method of accounting by recognizing its pro rata share of Fortitude Holdings’ U.S. GAAP earnings, which is included in principal investment income in the unaudited condensed consolidated statements of operations. These amounts are inclusive of unrealized gains (losses) related to the change in fair value of embedded derivatives related to certain reinsurance contracts included in Fortitude Re’s U.S. GAAP financial statements. Modified coinsurance is subject to the general accounting principles for hedging, specifically the guidance originally issued as Derivatives Implementation Group Issue No. B36: Embedded Derivatives: Modified Coinsurance Agreements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments (“DIG B36”). As of March 31, 2020 and December 31, 2019, the
Company’s investment in Fortitude Holdings was $1,077.9 million and $1,200.9 million, respectively, which reflected $539.1 million and $628.2 million of cumulative unrealized gains related to the change in the fair value of embedded derivatives.
At the time the Company contributed its existing 19.9% stake in Fortitude Holdings to Carlyle FRL, the Company’s investment became an ownership interest in the fund. Accordingly, the Company began accounting for its investment under the equity method based on its net asset value in Carlyle FRL, which is an investment company that accounts for its investment in Fortitude Holdings at fair value. The contribution of the Company’s 19.9% interest to Carlyle FRL resulted in a loss in principal investment income (loss) of $620.7 million in the three months ended June 30, 2020. During the three and nine months months ended September 30, 2020, the Company recognized principal investment income (loss) of $28.7 million and $(703.9) million. As of September 30, 2020, the Company’s investment in Carlyle FRL was $542.3 million, relative to its cost of $465.4 million. Following the contribution, the Company no longer records its pro rata share of the U.S. GAAP earnings of Fortitude Holdings. Refer to Note 4 in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 for summarized financial information of Fortitude Holdings for the three and six months ended June 30, 2020 and 2019, given the significance of the results of Fortitude Holdings relative to the Company’s results prior to the contribution of its interest to Carlyle FRL.
Strategic Investment in NGP
The Company has equity interests in NGP Management Company, L.L.C. (“NGP Management”), the general partners of certain carry funds advised by NGP, and principal investments in certain NGP funds. The Company accounts for its investments in NGP under the equity method of accounting, and includes these investments in the Real Assets segment. These interests entitle the Company to an allocation of income equal to 55.0% of the management fee-related revenues of NGP Management which serves as the investment advisor to certain NGP funds as well as 47.5% of the performance allocations received by certain current and future NGP fund general partners.
The Company’s investments in NGP as of September 30, 2020 and December 31, 2019 are as follows:
As of
September 30, 2020December 31, 2019
(Dollars in millions)
Investment in NGP Management$376.1 $383.6 
Principal investments in NGP funds49.8 67.9 
Total investments in NGP$425.9 $451.5 
Investment in NGP Management. The Company’s equity interests in NGP Management entitle the Company to an allocation of income equal to 55.0% of the management fee-related revenues of NGP Management, which serves as the investment advisor to the NGP Energy Funds. Management fees are generally calculated as 1.0% to 2.0% of the limited partners’ commitments during the fund’s investment period, and 0.6% to 2.0% based on the lower of cost or fair market value of invested capital following the expiration or termination of the investment period. Management fee-related revenues from NGP Management are primarily driven by NGP XII, NGP XI and NGP X during the three and nine months ended September 30, 2020 and 2019.
The Company records investment income (loss) for its equity income allocation from NGP management fee-related revenues and also records its share of any allocated expenses from NGP Management, expenses associated with the compensatory elements of the strategic investment, and the amortization of the basis differences related to the definite-lived identifiable intangible assets of NGP Management. The net investment income (loss) recognized in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019 were as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in millions)
Management fee-related revenues from NGP Management$18.6 $23.6 $56.8 $75.2 
Expenses related to the investment in NGP Management(2.9)(2.7)(8.6)(7.9)
Amortization of basis differences from the investment in NGP Management(1.1)(1.5)(3.2)(4.3)
Net investment income from NGP Management$14.6 $19.4 $45.0 $63.0 
The difference between the Company’s remaining carrying value of its investment and its share of the underlying net assets of the investee was $5.3 million and $8.5 million as of September 30, 2020 and December 31, 2019, respectively; these differences are amortized over a period of 10 years from the initial investment date. The Company assesses the remaining carrying value of its equity method investment for impairment whenever events or circumstances indicate that the carrying value may not be recoverable, and considers factors including, but not limited to, expected cash flows from its interest in future management fees and NGP’s ability to raise new funds.
Investment in the General Partners of NGP Carry Funds. The Company’s investment in the general partners of the NGP Carry Funds entitle it to 47.5% of the performance allocations received by certain current and future NGP fund general partners. The Company records its equity income allocation from NGP performance allocations in principal investment income (loss) from equity method investments rather than performance allocations in its unaudited condensed consolidated statements of operations. There were no net investment earnings (losses) related to these performance allocations for the three and nine months ended September 30, 2020. The Company recognized net investment earnings (losses) related to these performance allocations of $(81.6) million and $(111.5) million for the three and nine months ended September 30, 2019, respectively.
Principal Investments in NGP Funds. The Company also holds principal investments in the NGP Carry Funds. The Company recognized net investment earnings (losses) related to principal investment income in its unaudited condensed consolidated statements of operations of $0.9 million and $(3.8) million for the three months ended September 30, 2020 and 2019, respectively, and $(14.0) million and $(7.4) million for the nine months ended September 30, 2020 and 2019, respectively.
Principal Investments in CLOs and Other Investments
Principal investments in CLOs and other investments as of September 30, 2020 and December 31, 2019 were $600.6 million and $505.2 million, respectively, and primarily consisted of investments in CLO senior and subordinated notes. A portion of these investments is collateral to CLO term loans (see Note 5). As of September 30, 2020, principal investments in CLOs and other investments also includes the Company’s investment in the preferred securities of TCG BDC, Inc. (“TCG BDC”), a Carlyle-affiliated business development company, of $57.6 million (see Note 8).
Investment Income (Loss)
The components of investment income (loss) are as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in millions)
Performance allocations
Realized$86.8 $117.6 $415.7 $189.0 
Unrealized390.6 (5.2)315.9 520.1 
477.4 112.4 731.6 709.1 
Principal investment income (loss) from equity method investments (excluding performance allocations)
Realized26.9 30.9 105.3 157.4 
Unrealized48.8 185.8 (756.3)699.8 
75.7 216.7 (651.0)857.2 
Principal investment income (loss) from investments in CLOs and other investments
Realized0.3 (0.5)0.5 0.6 
Unrealized30.7 (4.0)(8.7)(1.8)
31.0 (4.5)(8.2)(1.2)
Total$584.1 $324.6 $72.4 $1,565.1 
The performance allocations included in revenues are derived from the following segments: 
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in millions)
Corporate Private Equity$291.6 $(53.8)$852.2 $161.5 
Real Assets45.0 54.6 (126.2)313.6 
Global Credit16.3 4.1 (24.0)28.2 
Investment Solutions124.5 107.5 29.6 205.8 
Total$477.4 $112.4 $731.6 $709.1 
 
Approximately 46%, or $217.9 million, of performance allocations for the three months ended September 30, 2020 are related to the following funds along with total revenue recognized (total revenue includes performance allocations, fund management fees, and principal investment income):
•Carlyle Partners VI, L.P. (Corporate Private Equity segment) - $141.7 million, and
•Carlyle Asia Partners IV, L.P. (Corporate Private Equity segment) - $112.4 million.
Performance allocations for the nine months ended September 30, 2020 are primarily related to Carlyle Partners VI, L.P. (Corporate Private Equity segment) with total revenue recognized (total revenue includes performance allocations, fund management fees, and principal investment income) of $773.4 million. In addition to Carlyle Partners VI, L.P., performance
allocations of $129.9 million, for the nine months ended September 30, 2020 are related to the following funds along with total revenue recognized (total revenue includes performance allocations, fund management fees, and principal investment income):
•Carlyle Asia Partners IV, L.P. (Corporate Private Equity segment) - $323.5 million, and
•Carlyle International Energy Partners I, L.P. (Real Assets segment) - $(144.9) million.
Approximately 33%, or $37.0 million, of performance allocations for the three months ended September 30, 2019 are related to the following funds along with total revenue recognized (total revenue includes performance allocations, fund management fees, and principal investment income):
•AlpInvest Co- & Secondary Investments 2006-2008 (Investment Solutions segment) - $58.1 million,
•Carlyle Partners VI, L.P. (Corporate Private Equity segment) - $55.5 million,
•Carlyle Asia Partners V, L.P. (Corporate Private Equity segment) - $39.3 million,
•Carlyle Realty Partners VII, L.P. (Real Assets segment) - $31.9 million,
•Carlyle Europe Technology Partners III, L.P. (Corporate Private Equity segment) - $26.5 million,
•Carlyle Realty Partners V, L.P. (Real Assets segment) - $20.3 million,
•Carlyle Partners V, L.P. (Corporate Private Equity segment) - $14.3 million,
•Carlyle Strategic Partners IV, L.P. (Global Credit segment) - $(4.7) million,
•Carlyle Europe Partners IV, L.P. (Corporate Private Equity segment) - $(33.0) million, and
•Carlyle Asia Partners IV, L.P. (Corporate Private Equity segment) - $(91.9) million.
Additionally, $(73.6) million in total revenue was recognized in our investment in NGP XI for the three months ended September 30, 2019.
Approximately 49%, or $350.6 million, of performance allocations for the nine months ended September 30, 2019 are related to the following fund along with total revenue recognized (total revenue includes performance allocations, fund management fees, and principal investment income):
•Carlyle Realty Partners V, L.P. (Real Assets segment) - $187.3 million,
•Carlyle Partners VI, L.P. (Corporate Private Equity segment) - $149.7 million, and
•AlpInvest Co- & Secondary Investments 2006-2008 (Investment Solutions segment) - $80.2 million.
Additionally, $(79.3) million in total revenue was recognized in our investment in NGP XI for the nine months ended September 30, 2019.
Carlyle’s income (loss) from its principal equity method investments consists of:
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in millions)
Corporate Private Equity$19.6 $1.5 $27.1 $13.2 
Real Assets21.1 (64.3)33.6 29.6 
Global Credit33.9 277.5 (709.9)803.4 
Investment Solutions1.1 2.0 (1.8)11.0 
Total$75.7 $216.7 $(651.0)$857.2 
The principal investment income (loss) in Global Credit for the three and nine months ended September 30, 2020 includes $28.7 million and $(703.9) million, respectively, from our equity method investment in Fortitude Holdings. The principal investment income (loss) in Global Credit for the three and nine months ended September 30, 2019 includes $281.6 million and $808.9 million, respectively, from our equity method investment in Fortitude Holdings.
Investments of Consolidated Funds
The Company consolidates the financial positions and results of operations of certain CLOs in which it is the primary beneficiary. During the nine months ended September 30, 2020, the Company formed two new CLO for which the Company is the primary beneficiary.
There were no individual investments with a fair value greater than five percent of the Company’s total assets for any period presented.
Interest and Other Income of Consolidated Funds
The components of interest and other income of Consolidated Funds are as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in millions)
Interest income from investments$50.8 $49.8 $155.0 $144.5 
Other income5.5 1.5 9.5 5.0 
Total$56.3 $51.3 $164.5 $149.5 
    
Net Investment Gains (Losses) of Consolidated Funds
Net investment gains (losses) of Consolidated Funds include net realized gains (losses) from sales of investments and unrealized gains (losses) resulting from changes in fair value of the Consolidated Funds’ investments. The components of net investment gains (losses) of Consolidated Funds are as follows: 
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in millions)
Gains (losses) from investments of Consolidated Funds$163.1 $0.6 $(219.2)$18.8 
Gains (losses) from liabilities of CLOs(139.2)(2.5)180.3 (25.7)
Total$23.9 $(1.9)$(38.9)$(6.9)
The following table presents realized and unrealized gains (losses) earned from investments of the Consolidated Funds:
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (Dollars in millions)
Realized gains (losses)$(9.6)$1.9 $(49.9)$(9.5)
Net change in unrealized gains (losses)172.7 (1.3)(169.3)28.3 
Total$163.1 $0.6 $(219.2)$18.8