Carlyle, Blackstone confident in C-corp structure under future tax regimes

Carlyle and Blackstone executives talked about the firms’ C-corp structures and how they might react to a higher tax rate under a new presidency; Apollo’s Black expects impact on fundraising amid board review.

Earnings: In its third quarter earnings report, Carlyle chief executive Kewsong Lee explained why he’s confident that the firm’s C-corp structure is adaptable to changes in tax laws of the kind that might come to fruition under a Biden presidency.  CFO Curt Buser also chimed in on whether a change in tax law would impact dividends. The PE giant saw a boost in earnings, driven by Asia and US buyout funds in its corporate private equity portfolio. Carmela Mendoza has the details.

Over at Blackstone, CFO Michael Chae said earlier in the week that the firm was happy with the fact that its dividends are taxed like every other corporate issuer under a C-corp issuer, and highlighted that the firm’s dividend yields are about double the S&P 500’s. He also noted the firm had taken into account a future potential tax rate of 25-28 percent when it made the change to a C-corp, saying that it would have a “low single-digit” impact additional average earnings dilution over the next several years. (Senator Biden says he would raise the corporate tax rate from 21 percent to 28 percent if elected.)

Blackstone CEO John Gray said that while “there could certainly be some headwinds” on the tax front under a new presidency, “we’ve been in environments that have been all red, all blue, mixed, we’ve been in an environment of rising taxes and regulatory focus, declining taxes [and] regulatory focus, and the thing that’s been consistent is we’ve delivered great results for our clients and the firm’s grown. And we don’t expect that to be any different as we look forward.”

On Apollo’s earnings call, chief executive Leon Black acknowledged the firm will likely experience a fundraising slowdown for its drawdown vehicles, as LPs await the outcome of a board review into Black’s relationship with deceased convicted sex offender Jeffrey Epstein. Isobel Markham has more.

Email prepared by Graham Bippart