8-K: KKR Reports Record Fee Related Earnings and $32 Billion in New Capital Raised in Second Quarter 2024

KKR announced strong second quarter 2024 results, highlighted by record fee related earnings and $32 billion in new capital raised, bringing total assets under management to over $600 billion.

Summary

• KKR reported a strong second quarter in 2024, with record Fee Related Earnings (FRE).
• The company raised $32 billion in new capital during the quarter, bringing Assets Under Management (AUM) to over $600 billion.
• KKR deployed $23 billion in the quarter, a significant increase from $10 billion in the same period last year.
• Fee Related Earnings (FRE) reached $755 million, or $0.84 per adjusted share, a 25% year-over-year increase.
• Total Operating Earnings (TOE) were $1.0 billion, or $1.17 per adjusted share, up 36% year-over-year.
• Adjusted Net Income (ANI) was $972 million, or $1.09 per adjusted share, a 49% year-over-year increase.
• Assets Under Management (AUM) totaled $601 billion, a 16% increase year-over-year.
• Fee Paying Assets Under Management (FPAUM) reached $487 billion, also up 16% year-over-year.
• The company raised $108 billion in new capital over the last twelve months (LTM).
• Capital invested in the quarter was $23 billion, and $61 billion over the LTM.
• KKR declared a regular dividend of $0.175 per share of common stock for the quarter.

Sentiment

Score: 8

Explanation: The document presents a very positive outlook with strong financial results, record earnings, and significant capital raising and deployment. The company's growth trajectory and strategic initiatives are also highlighted, indicating a positive sentiment from an investment perspective.

Positives

• KKR experienced strong growth in management fees and capital markets transaction fees.
• The company's fee related earnings margin increased from 61% to 65% in the last twelve months.
• KKR has a diversified portfolio with uncalled commitments of $108 billion.
• The company has $53 billion of committed capital not yet paying fees, with a weighted average management fee rate of approximately 95 bps.
• KKR's share of the Strategic Holdings businesses' LTM Adjusted Revenues is $3.6 billion and LTM Adjusted EBITDA is $0.9 billion.
• KKR maintains a strong financial profile with an 'A' rating from both S&P and Fitch.
• The average maturity of KKR's debt is approximately 16 years with a weighted average fixed coupon of 3% after-tax.
• KKR has $2.75 billion of undrawn corporate credit revolver capacity.
• KKR has $2.8 billion of embedded unrealized gains on the balance sheet at quarter end.

Negatives

• GAAP Net Income attributable to KKR common stockholders decreased to $667.9 million for the quarter, down from $844.5 million in the same quarter last year.
• Net cost of insurance totaled $1.1 billion in the quarter, driven by new business growth and higher funding costs.
• Strategic Holdings Operating Earnings are expected to be modest in 2024.

Risks

• The document contains forward-looking statements that are subject to various risks and uncertainties.
• Actual results may differ materially from those reflected in the forward-looking statements.
• Past performance is not a guarantee of future results.
• The company's performance is subject to market and economic conditions.
• There is no guarantee that the company's expectations for Strategic Holdings Operating Earnings will be realized.
• Perpetual capital is subject to material reductions from changes in valuation and withdrawals by investors.
• The company's insurance business is subject to various risks, including interest rate fluctuations and changes in accounting standards.

Future Outlook

KKR expects Strategic Holdings Operating Earnings to be modest in 2024, but to grow to $300+ million by 2026, $600+ million by 2028, and $1+ billion by 2030. The company also has a healthy deal pipeline for the second half of 2024.

Management Comments

• This was a strong quarter for KKR.
• We reported record Fee Related Earnings and are experiencing acceleration across our key operating metrics and financial results.
• Momentum across the firm remains high, and we remain confident in our team, our model and our growth prospects.

Industry Context

KKR's strong performance reflects the continued demand for alternative investments and the company's ability to raise and deploy capital effectively. The growth in perpetual capital is also a positive trend, indicating long-term investor confidence in KKR's strategies. The company's expansion into insurance through Global Atlantic is also a significant development, diversifying its revenue streams.

Comparison to Industry Standards

• KKR's AUM of $601 billion places it among the largest alternative asset managers globally, comparable to firms like Blackstone, Apollo, and Carlyle.
• The 16% year-over-year growth in AUM is competitive with industry averages, though specific comparisons depend on the mix of asset classes and strategies.
• The 25% year-over-year growth in Fee Related Earnings is a strong result, indicating efficient management of fee-generating assets.
• The 18% appreciation in the traditional private equity portfolio is a solid performance, though it is important to compare this to specific benchmarks and peer group performance.
• The 17% appreciation in the infrastructure portfolio is also a strong result, reflecting the demand for infrastructure assets.
• The 12% appreciation in both the leveraged credit and alternative credit composites is a good result, but it is important to compare this to specific benchmarks and peer group performance.
• The $32 billion in new capital raised in the quarter is a significant achievement, demonstrating KKR's ability to attract capital from investors.
• The $23 billion in capital deployed in the quarter is also a significant achievement, demonstrating KKR's ability to find attractive investment opportunities.

Stakeholder Impact

• Shareholders will benefit from the strong financial results and the declared dividend.
• Employees may benefit from the company's growth and success.
• Customers and partners will benefit from KKR's continued investment and expansion.
• Creditors will benefit from KKR's strong financial position and credit rating.

Next Steps

• KKR will hold a conference call to discuss the financial results on July 31, 2024.
• The company will continue to deploy capital across its various investment strategies.
• KKR will continue to focus on growing its assets under management and fee-related earnings.
• The company will continue to monitor the performance of its Strategic Holdings segment and its insurance business.

Key Dates

Keywords

Assets Under Management, Fee Related Earnings, Private Equity, Real Assets, Credit, Capital Markets, Insurance, Global Atlantic, Strategic Holdings, Investment Management