KKR earnings slump 11% in third quarter as dealmaking slows

KKR & Co’s earnings fell 11 per cent in the third quarter - still exceeding analysts’ estimates - as volatile markets weighed on dealmaking.

Distributable earnings fell to US$823.7 million, or 93 US cents a share, from US$925.1 million, or US$1.05, a year earlier, the alternative-asset manager said on Tuesday (Nov 1) in a statement. That beat the 87-cent average estimate of 12 analysts surveyed by Bloomberg.

“In our experience, market dislocations create investment opportunity, and with US$113 billion of dry powder, we are very well positioned,” co-chief executive officers Joe Bae and Scott Nuttall said in the statement.

Private equity firms are facing tumbling valuations, higher borrowing costs and a slowdown in asset sales as recession concerns weigh on the macroeconomic picture. Blackstone reported a 16 per cent drop in third-quarter distributable earnings as the world’s largest alternative-asset manager faces its own dealmaking pressures.

Shares of New York-based KKR rose 3.2 per cent to US$50.18 at 9.40 am in New York. The stock has lost about a third of its value this year.

KKR’s vast operations, with US$496 billion of assets under management at the end of September, give the firm a broad window into the state of the economy. Its biggest investments include insurance brokerage USI, veterinary hospital network PetVet Care Centres and Heartland Dental.

The private equity portfolio fell 4 per cent in the quarter, extending its drop for the past 12 months to 8 per cent, while the credit and real asset portfolios were largely unchanged.

Fee-related earnings rose 2.3 per cent from a year earlier to US$541.8 million as a gain in management revenue mitigated declines in transaction and monitoring income. Transaction fees fell 41 per cent to US$116 million as volatility crimped debt deals.

KKR raised US$13 billion of fresh capital during the third quarter, boosting assets under management by 8 per cent from the same period last year.

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Perpetual capital rose 24 per cent to US$186 billion, driven by the growth of the Global Atlantic insurance business and the acquisition of a Japanese real estate manager.

KKR invested US$16 billion during the quarter, with US$7 billion allocated to credit investments. BLOOMBERG