UPDATE: Goldman Sachs Upgrades Carlyle Group LP to Buy, Raises PT on Distribution Growth, Strategic Diversification

In a report published Thursday, Goldman Sachs analyst Marc Irizarry upgraded the rating on

from Neutral to Buy, and raised the price target from $33.00 to $36.00. In the report, Goldman Sachs noted, “We upgrade CG to Buy from Neutral with a price target of $36 (17% upside vs. 0% average upside for Asset Managers). CG has underperformed alternative asset manager peers by 26% YTD, likely on delayed realizations (vs. Street expectations) and higher expenses. We expect CG to outperform for three reasons: (1) Carried interest generation is set to accelerate: We expect the distribution pipeline and $1.3 bn net accrued carry to drive strong distributable earnings (DE) growth in 2014 and 2015. CG's growing public PE portfolio (about $14 bn of value, or 23% of $62 bn total) ought to be a key driver of realizations as 8 of the top 10 publicly traded investments are in funds that can pay cash carry. (2) Positioned for more profitable asset gathering going forward: We think CG will benefit from growing demand for multi-asset investment solutions. Given early investment spend, CG is also well positioned as smaller HNW/retail investors grow alternative allocations. (3) Diversification of platform to drive AuM growth, greater earnings reliability and a higher multiple. Even as we expect cash earnings from PE to grow 20%, we anticipate non-PE businesses will comprise a growing share of ENI and DE, improving diversification and reliability. We expect CG's multiple to move higher as exits are announced, key PE funds begin to generate carry, and quarterly reports show operating leverage as upfront investment in new client acquisition and business development pays off with inflows. We raise our 2014/2015 ENI estimates +2%/+5% on higher expected fundraising.” Carlyle Group LP closed on Wednesday at $30.64.