KKR earnings surge 58%, joins half-trillion club in private markets race for scale

KKR & Co reported a third-quarter profit that beat Wall Street estimates as the alternative asset manager generated record transaction fees for its capital markets business.

Adjusted net income rose 58 per cent to US$1.24 billion, or US$1.38 a share, KKR said on Thursday (Oct 24) in a statement. That beat the US$1.20 average estimate of analysts surveyed by Bloomberg.

Shares of KKR rose 3.24 per cent to a record high of US$143.04 at 9.30 am in New York.

Fee-related earnings rose 79 per cent to a record US$1 billion, driven by management fees and a jump in those earned for arranging financing for companies. Its fee-paying assets jumped 19 per cent year over year to US$506 billion.

“Activity levels across the firm remain high as we experience a continued acceleration across our key operating metrics and financial results,” co-chief executive officers Joe Bae and Scott Nuttall said in the statement.

Assets under management increased 18 per cent from a year earlier to US$624 billion.

KKR, one of the largest publicly traded alternative asset managers, invests across a range of assets, including private equity, credit, infrastructure and real estate.

Shares of the New York-based company returned 68 per cent this year through Wednesday, outpacing its biggest peers, including Apollo Global Management, Blackstone and Carlyle Group.

KKR’s capital markets unit brought in US$424 million arranging financings, with about half of those fees coming from infrastructure and for debt products.

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Total operating earnings were US$1.3 billion for the period. That metric, introduced during the first quarter, includes fee-related earnings from asset management, earnings from long-term private equity holdings and profit from its Global Atlantic insurance arm.

Global Atlantic profit rose 46 per cent to US$307.5 million from a year earlier. KKR acquired 100 per cent ownership of the annuities business in the first quarter.

Total investing earnings, or income from selling assets, rose 7 per cent to US$318.4 million.

KKR also raised US$24 billion in new capital during the third quarter, bringing its dry powder to US$108 billion as of Sep 30. The private equity portfolio delivered a 5 per cent gross return, while the infrastructure portfolio grew by 6 per cent.

KKR became the fourth private-markets firm to eclipse US$500 billion of fee-paying assets under management, moving further beyond its buyout roots in a push for more client assets and steadier fees.

Blackstone had more than US$820 billion of fee-earning assets at the end of September, and Apollo Global Management and Brookfield Asset Management previously passed the half-trillion mark.

Growth for the half-trillion club has been explosive, driven by investor interest in a wider array of private investments and the firms’ acquisitions of insurers and other managers. The four firms now have more than US$2.3 trillion in fee-paying capital, nearly quadruple what they had eight years ago. BLOOMBERG