Q3 2020 KKR & Co Inc Earnings Call
[music].
I will now hand, the call over to Craig Larson head of Investor Relations for KKR.
Thank you good morning, everybody welcome to our third quarter 2020 earnings call.
I'm joined this morning by Scott novel, our co President and co CEO.
And also by Robin Williams, our CFO.
We'd like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our press release, which.
Which is available on <unk> Investor Center section a kinky our dotcom.
This call will contain forward looking statements, which do not guarantee future events or performance. So please refer to our SEC filings for cautionary factors related to these statements.
Unlike previous quarters, we've also posted a supplementary deck on our website they will be referring to over the course of the call.
We've all experienced volatility and disruption in many ways 2020 across the globe. So we continue to hope that everyone is safe and healthy.
But in terms of KKR in our results. This quarter, we've continued to see strong performance really across all of our metrics.
Turning to page two of our supplement to begin <unk>.
I can see that our key metrics are performing nicely.
Looking at the upper left hand part of the page assets under management came in at 234 billion, representing a 12% increase from a year ago.
And its fund raising in capital deployment momentum continues.
Management fees over the past 12 months as you can see by the chart in the right at the top right hand corner.
Grew by 13% to $1.3 billion.
Looking at the bottom left you can see our book value per share saw a meaningful increase this quarter.
By strong investment performance in.
In the third quarter looks I appreciate your grew from $17.73 at 630.
The $20.26 up 14%.
And more broadly is up 11% from $18.22 per share a year ago.
And finally on the bottom right hand side, you see our after tax distributable earnings.
First in terms of this quarter do you came in at 410 million or 48 cents on a per share basis.
Both of these figures are approximately 25% from our results last quarter.
And looking over the last 12 months. Despite all the volatility we've endured we reported one and a half billion about after tax de <unk>, which is essentially flat compared to the figure from a year ago.
Moving onto our summary financials for the third quarter. Please turn to page three of the supplement.
Let's walk through the left hand part of that slide.
Management fees increased to 360 million up 14% to Q3 last year.
Driven most significantly by Asia for which entered its investment period in the quarter.
Transaction fees totaled 301 million, we had a strong quarter within capital markets transaction fees here coming in at 158 million given the breadth of deployment and monetization activities. We saw over the course of the quarter.
Realize performance income came in at 234 million.
And with 260 million of realized investment income total.
Total revenues were 1.1 billion this quarter up 11% from the same quarter a year ago.
Notable monetization activity in the quarter included the appeal I drew.
British ecommerce from that.
The dividend recapitalization that that the core which is a software affirming in North America Fund 11, which we subsequently sold as well as a secondary Pfizer.
And on a blended basis, our exits this quarter were done at over three times cost.
Turning to our expenses for the quarter compensation expenses were 427 million.
Which brings our total compensation margin, including equity based comp to 40%.
Non compensation non compensation excuse me operating expenses were $90 million.
Our operating margin increased to 52% with after tax distributable earnings then of the 410 million or 48 cents per share.
And with that I'd like to turn it over to Rob.
Thanks, Craig and good morning, everyone.
Similar to last quarter I want to start off by focusing on a year to date performance.
We clearly experienced some market volatility in 2020.
We believe our results over the past nine months highlight both the resilience of our business model and the high level of execution by our global teams.
I'm going to start with the right hand side of page three.
Focusing initially on three major drivers of our revenue.
First our.
Our management fees are up 13% this year.
Our ability to realize carry through different market environments also remains strong, bringing I realize performance fees to just under 1 billion year to date.
And finally, our balance sheet has continued to perform with realized investment income up 8% continuing to demonstrate the important contribution of this revenue stream towards our overall financial performance.
In aggregate our revenues are up 7% through the first nine months of the year.
Moving to our expenses compensation margin has remained at 40% through the year.
In terms of non compensation related expenses, we have been deliberately prudent expense management in 2020.
Obviously benefited from the limited amount of travel and office related expenses this year.
Year to date, our other operating expenses together with occupancy are down 4% compared to this period last year, despite making some very meaningful investments across our platform.
As a result, our distributable operating margins are up 100 basis points, while our total operating earnings are up 9%.
In addition, our after tax de per share of $1.28 for the nine months ended September 2020 compares favorably to $1.23 for the same period in 2019.
It is important to note here that we have completed our financing related to global Atlantic in Q3, which.
Which has already started to burden our after tax de per share in advance of generating the revenue associated with the acquisition.
Switching to capital ratio.
On a year to date basis, we have raised 80% more capital that we raised in the same period in 2019.
Which really does set us up nicely for future growth.
Moving to investment performance on page four which.
Which has largely been a real strength for us this year.
Our flagship private equity funds returned 27% over the past 12 months.
And our real estate and infrastructure strategies returned 10% and 7% respectively over that same period.
In credit we had a very positive quarter.
Average credit, which is the largest of our credit businesses by Iran was up 5% in Q3, and it's up 3% over the LTM period.
Alternative credit was up 6% in the quarter and down 7% LTL.
Our alternative credit numbers are a combination of our private performing credit strategies, which had solid performance at our distressed portfolio, which has taken some marks LTM.
Turning to page five.
I thought it was worth spending a minute specifically discussing our benchmark <unk> performance.
As you can see really across all geography is our flagship private equity funds are meaningfully outperforming their benchmark indices honest since inception basis.
This performance is in part generated by our portfolio construction, especially in a bifurcated market like the one we have seen in 2020.
We are underway some of the harder hit sectors. While also importantly, choosing to have a large exposure to technology with a focus on investments in data ecommerce and digitalization.
Our relative waiting to Asia has also benefited our performance.
Page six provides some additional detail on our balance sheet.
Consistent with the performance across the firm our book value per share increased to $20.26, representing a 14% increase from June thirtyth.
Our balance sheet investment portfolio returned a 11% in the quarter and our net accrued carry balance increased 44% from Q2, providing additional visibility for future Karen.
Also as it relates to our balance sheet, it's worth highlighting our buyback activity this year.
Since January we've used 324 million under our buyback program.
The majority of this activity occurred in the first four months of the year as we leaned into the volatility and repurchase stock at a weighted average price of just over $24 per share.
In total now since we announced our first buyback program at the end of 2015, we used 1.4 billion to retire shares at an average price of just under $19 per share.
With that book value today in excess of $20 and the stock price, where it is we feel good about our activity levels here.
Turning to fund raising.
New capital raised totaled 8.7 billion in the quarter driven by fund raises across private markets in our U.S. real estate strategy as well as across three strategies in Asia real estate infrastructure and private equity.
Additionally, we raised capital relates a leveraged in private credit.
[noise] new capital raised from a fee paying get U.M. standpoint was a record 19 billion. This quarter with 12 billion about attributed to Asia for as it entered its investment period in July.
We now have over 13 billion of capital in Asia for I will provide further updates on the fund raise as it continues to progress.
The 32 billion of capital raised year to date importantly sets us up with 67 billion of dry powder, which is a high point for us.
As we have discussed on prior calls we really did lean in when the market was dislocated. So this dry powder is particularly noteworthy given the level of capital investment we have made year to date.
Now focusing on this deployment more specifically.
Private markets business had a record investing quarter was 6.2 billion deployed which was largely in transactions that were entered into during the more heightened market dislocation in the spring and early summer.
In Europe, two previously announced core PE investments closed.
Our infrastructure team continue to find compelling opportunities across various sectors in Europe and in Asia.
And the number of Asia, P. investments close, including our investment in jail.
And finally, an update on a couple of items related to global Atlantic.
We completed two financings in the quarter, the proceeds of which will be used to fund the acquisition.
In August we issued 1.15 billion of mandatory convertible preferred stock.
You will see in our earnings release on a distributable earnings basis that this offering is reported on a as if converted basis.
And subsequent to the mandatory convertible offering we also issued 750 million a 30 year senior notes with a 3.5% coupon.
Behind the scenes the GE 18, that's been hard at work at it closely follow and take care of the announcement of the acquisition in July Jay completed two block reinsurance transactions, adding an incremental $8 billion of assets.
Notably G.H. pipeline for similar transactions is quite active.
We have confidence in our team's ability to execute.
We continue to see really strong opportunities here for both organic and inorganic growth.
And with that let me hand, it over to Scott.
Thank you Rob.
Thank you everyone for joining our call today [noise].
All of US at KKR Hope you and your families are happy safe and healthy.
Our numbers speak for themselves this quarter, so I'm gonna be brief.
For my feet. There are a handful of things I thought I would highlight.
First.
We have invested and committed $42 billion. So far this year around the world and across strategies.
We were prepared to lean into dislocation coming into the spring and our preparedness has paid off.
Second.
Investment performance has been strong.
And we see more upside in the portfolio from here.
Third.
Fund raising momentum has continued.
In the first three quarters, we have raised $32 billion.
And we have three more flagship funds in over 20 other strategies in we're coming to market.
Over the next 18 months.
Fourth.
Our model is working.
With our combination of eight U M capital markets and balance sheet, we have multiple ways to win.
We have always felt our model is resilient.
One silver lining of this year has been an opportunity for that resilience to shine through.
And fifth.
The global Atlantic acquisition is on track.
And as you heard from Robert G.A. is winning in the marketplace and will be larger at closing than we had anticipated.
With multiple ways to grow from here.
It has been a busy year.
But we have a lot more ahead of us.
And with that we're happy to take your questions.
Thank you.
This time, we'll be conducting a question and answer session. He would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Anytime you wish to remove your question from the queue. Please press star two we ask that you limit your questions to one so others may have an opportunity to ask questions. You may reenter the queue by pressing star one.
Participants using speaker exhibit maybe that's starting to pick up your handset before pressing the star keys.
Yeah.
Our first question is from William Katz with Citi.
Thank you very much taking the question I'm, hoping you guys answered a little bit of a in some prepared commentary, but sky's just sort of wondering Rob. If you guys wanted to maybe just sort of step back and update us around or just the management fee walk up as you see it a another sort of quarter under your belt, just given sort of the outsized or you know economics this quarter and your commentary.
On a go blank transaction.
Sure. Thanks, a lot bill so nothing's changed in our view on the unmatched for cigarettes from here, we communicated a little while back that that our expectation is that.
Well be able to generate 50 plus percent management fee growth.
On top of that you know, we believe there's an additional 200 plus million.
Management fee that.
Yeah, we would expect to generate from well Atlantic and so I'd say, we continue to be convicted on being able to achieve that.
Okay, and just to follow up a big picture, maybe a little bit unanswerable today, but just it to the extent that there would be any kind of shifting carried interest taxation, how might that impact the economics of the franchise either bottom line or from a comp perspective, and then the harder part is to the extent there is any kind of sort of administrative changes next week.
How might that influence are you able to institutional allocations and weather relative appeal of alternatives more broadly.
Sure so as it relates to any changes or around carried interest taxation that won't have an impact on distributable earnings for us all four instead of are in kind of a higher taxes and so at the statutory rate and as you know we benefit from a little bit of a.
Tax step up that we had achieved at our C Corp conversion.
But other than that any kind of new revenue that comes into the problem is taxed at the statutory rate all the same.
And Bill just on the other parts of your question Scott So.
So no no impact on D., no impact on compensation or how we think about it.
And with respect to fund raising we do not expect any change in the tax code to have an impact.
Remember a lot of the people that invest with us or tax exempts and regardless of what happens from a tax code standpoint, we believe the interesting alternatives will continue to grow.
Thank you.
Thank you.
Our next question is from Glenn Schorr with Evercore.
Hi, Thanks very much.
I Wonder if you could talk a little bit more about alternative credit you mentioned that the performance and distress is not the biggest piece, but I'm curious.
On.
What you see as temporary burst permanent impairments in that book and the outlook more importantly for distressed because we keep thinking there's a good outlook, but every time.
Every time that happens more more stimulus comes up and maybe you could tie end the dislocation fund sports, what's going on and and this and the distressed landscape. Thank so much yeah. Thanks, a lot for the question Glenn It's Rob I'll start and I'm sure Scott will Hudson said he was here as well I think the punch line is we continue to view.
You know I never read outs in our distressed portfolios have taken some marks on an LTM basis quite favorably I bet. You also know and you hit on this we have shifted a number that are distressed oriented resources to our dislocation opportunity strategy and an eight week period in the spring we raised 2.8 billion dollar fund.
We have north of $4 billion of capital I committed to that strategy.
Already odd through you know the first several months of that fund strategy, we did either deployed or committed out little bit north of 40% that's fun already and so it's a big opportunity we think for us and that's why we have diverted some of the team to be focused on and those activities.
Yeah, just a and not a couple of thoughts Glenn. So first we feel good about the underlying portfolio. We think a bunch of those marks are going to come back secondly, when you look at the page in the deck that shows you know kind of the LTM period, it's important to keep in mind, you know that the convention in terms of how that page.
Just put together means that what's dragging that number down as our special sits to fund, which is all a 2.1 billion of fair value and $73 billion credit business. So our perspective is that a lot of that is going to come back over time, and it's a very small part of the overall business in credit as a whole continues to perform.
I think perhaps to your market opportunity question. We do think that there is going to continue to be an interesting opportunity, but what it's going to require us to be really nimble and kind of flexible as to how you deploy capital and that's why to your point, we raised the dislocation vehicle. He said two vehicles they have the ability to invest across asset classes.
We're investing not only in traditional distressed parts treated markets real estate credit corporate credit you got to be able to move quickly and actually some of the early investments. We've made there we've already monetized. So I think you should expect us to continue to scale that dislocation platform over time.
But that's how we're thinking about it it's nice controlled for just control distressed.
It is just being able to move quickly.
Thank you. Our next question is from Alex Blostein with Goldman Sachs.
Great. Thanks, Good morning, everybody. Thanks for the question I was hoping you could talk a little bit about deployment dynamics and the implications that might have on both the fund raising at a couple of markets business. So from what we could see you guys been quite active and the pipeline of deployment I'm just I guess in some of the public data looks strong coming up.
So I guess, what does it mean for sort of timing of North America up 13, you know the next and corporate bond or the next European Fund I in terms of both Kinda fund raising and when those fees could ultimately come on line.
And then I guess secondly, the outlook for the transaction revenues, albeit I I got kind of lumpy and hard to predict but just from a trajectory perspective, given the strong deployment topline how should we think about that over the next 12 months. Thanks.
Hi, Alex It's it's Craig why don't I give a a beginning part answer there as it relates to deployment and then as well as fund raising and then Scott and Rob do you want to add on.
I think you're right as it relates to deployment, it's been a really busy period for us.
You heard from Rob.
Private markets in particular in the third quarter was a really healthy figure for US I think that reflects a number of things one the overall growing platforms for US certainly also reflects the decisions that we had to lean into dislocation earlier in the year as Bob had mentioned the activity of the closed in Q3 large.
Only reflects transactions that were announced in the spring.
The third thing you see reflects the JV the geographic breadth that we have in our presence in Asia.
Asia within private equity a was that did this disease geography for its deployment wise in P in the quarter.
As well as year to date and as you will remember we do run a very localized model in Asia.
Well I think as it that that approach is very helpful for us as it relates to sourcing and executing opportunities.
I do think as it relates to fund raising the main dynamic is that things are on track. So as it relates to the three additional flagship funds for US in addition to.
The fund raising continued for Asia private equity strategy and then when you layer on the 20 plus additional strategies as we look forward I think everything is on pace for us and important in that is you know only 25% of those strategies that we see coming to market are.
First time for us. So I think we have predecessors that are performing and real benefits as it relates to maturation.
I do think as it relates to that overall deployment dynamic one of the things that is is correct that as it relates to accelerated deployment finding attractive risk reward if anything that can move the overall timing is as we try and think things more forward, but the overall message is one that we're on pace.
Just.
Alex It's Rob maybe a couple of points to add on in terms of the geographic breadth of our deployment.
As we look at where we're likely to have wind up in the air for the private equity perspective to actually close to a third a third a third Americas Europe and Asia in terms of to fund it and so that's really that geographic breadth and diversification has really helped us be able to lean into different opportunities on a global basis, then as it relates to the second part.
Your question in terms of the impact this could have on transaction fees you know our pipeline remains healthy for a best spent the remainder of the year of course, you've got a couple of months left in 2020 and yes. Some of the deals in our pipeline might slip to Q1, so it's a little bit hard to predict I transaction fees for the quarter, but but certainly our deployment.
Those have had helped us figures on a year to date basis I fired deployment on continues to be robust over the coming quarters. They then you should see a similar level of transaction fees flat.
Thank you. Our next question is from Jeremy Campbell with Barclays.
Hey, Thanks, just quick point of clarification for asked the question you know relative to the.
200 million plus fee revenue opportunity from global Atlantic you guys highlighted back in the Summertime just curious if these recent block deals were baked into that are incremental to that.
The short answer Jeremy is there incremental put that right and then I guess bigger picture and glove Atlantic can you remind us what the typical organic growth looks like I think the summer slide decks to something like $9 billion and then maybe how you envision the growth algorithm going forward between organic flow in inorganic.
Yes.
Yeah sure Jeremy Scott I'll take that so I think the way to think about it is you know global Atlantic not viewing this multiple ways to grow so there's the retail business, where they have relationships with over 200 banks and broker dealers, there's the institutional business and it's really although it can be thought of as the organic or inorganic.
I suppose there's a lot of aspects about that are you know fairly recurring and then somewhat predictable for example, they have flow reinsurance arrangements with a number of counterparties, they're in the pension risk transfer business and then on top of that you've.
You've got these reinsurance blocks that you referenced that although they are transaction like there's actually been a very steady stream at a very consistent flow for the business over the last several years. So there's opportunities to grow from what they've done group that together and we called the institutional business and then third there's potential acquisitions of other companies.
Which is truly the inorganic as you can see from this slide deck from July the company has by virtue of really that retail and institutional approach grown quite significantly and a very steady pace over time I think you know with the addition of hopefully our help in terms of access to capital and investment returns our XP.
Dictation is that we can continue to see attractive growth and we're not going to put out a forecast per se, but we're happy to share with you what we're seeing over time.
And as you noted we do expect to be a larger at closing than we had expected partially because the organic growth frankly has been better than you thought and the retail channel. So far and you know the blocks are on top of that but we'll we'll keep you updated along the way.
Great. Thanks, so much.
Thank you.
Our next question is from Patrick Davitt with Autonomous research.
Hi, Good morning, you mentioned, the upper Coursera, which looks fairly punchy. So could you give us an update on kind of a be announced pipeline of carry and investment income as it sits right now.
Yeah, sure Hey, Patrick it's it's Rob and just to clarify that was added that Craig mentioned was a dividend for at the car in Q3, the announced sale closing in Q4 of which are good lead in to your question. So as it relates to Q4 revenue.
As of now we have more than 250 million of performance and balance sheet revenue that we've got line of sight on and so this is from deals that are already closed or have been signed up and we expect to close as well as from booked incentive fee.
I have already been crystallized and so yeah, we're only one month into the quarter I hopefully, we'll have some things break out in our direction Nov to seven Nics in November and December I tell that that number but our flight of size about 250 little bit North of 250, right now which is similar to where we were at this point last quarter.
Thank you.
Our next question is from my carrier with Bank of America.
Hi, good morning, Thanks for taking the question just given the strength you in private equity performance I just wanted to get you maybe some color on what you're seeing maybe across you know some of the different industries region, because it was obviously pretty broad based but.
But when we look at you know obviously they <unk> activity you know, it's it's pretty you got a stark difference. So just give any color in terms of what the drivers and if it is as broad based as it as it looks thanks.
Hey, Mike It's Craig why don't I start Scott may adding I.
I think the answer is I really situation specific so you know businesses that are in the troubled sectors or have seen real impacts from coated obviously, you see that I think on the flip side, we have seen real strength in companies focused in areas that I mean given tailwind.
Wins from coated so that's ecommerce gaming mobile gaming software housing related themes, a health and wellness and the like and.
I think given the conviction that we've had around several of those scenes or we were better positions.
As a result of that and so that's really what you see across the performance statistics for the year and I think it is worth mentioning Asia again as part of that as you know we have a large business in Asia and our geographic focus again is helped it helped us learn in the spring as these economies recovered first.
And currently it should help as most Asian economies haven't seen the recent spike in cold the trends that we've seen across several states in the U.S. and European countries.
Yeah, Mike the only thing I'd add just to put some numbers around that so just to give you a sense. The it really is a portfolio construction.
And the fact that we've been focused to Craig's point on a number of investment themes for the last several years that we think have long term durability and that actually the pandemic has probably accelerated the development of those themes. So a big part of the answer to your question why you're seeing the performance is we've been meaningfully underweight.
The sectors most dramatically impacted so if you aggregate you know hotels and leisure retail and energy is the sum total of about 8%.
Of our total exposure even within real estate, it's a very small piece on the hotel side.
So we've had very little exposure to the most impacted sectors and we all can tell from the market doesn't really bifurcated story, where we have been more exposed has been tech media telecom to Greg's point, that's been 25%, where we've had our exposure and.
And then Asia has been you know about a third of our total PE portfolio, 30% or so.
So the answer really is around portfolio construction and leading into these things that we think are just being accelerated.
Got it thanks.
Thanks.
Our next question is from Gerry O'hara with Jefferies.
Great. Thanks [noise].
The my question sort of runs balance sheet and the allocations. There. So clearly that the allocation system kind of change with the addition of a global Atlantic I think in the past you talked about kind of diversifying the exposure across asset classes, but perhaps you can give us an update on how you're thinking about that post the insurance assets.
Coming into the mix.
Or if that's even really a focus right now.
Hey, Jerry it's Rob Thanks for the question.
So well Blackstone to be the largest single investment our balance sheet, it's not going to shop and our investment table for say since it's really going to be a consolidated operating assets of KCI I was like like our other operating businesses in terms of diversification of our balance sheet Holdings. If you look at the chart.
In our in our earnings release, and well it does show that 70% exposure private equity inside of that we've got meaningful exposure to core private equity, it's about 20% of our portfolio a little bit north of that today.
Well go next exposure growth equity and so yes, we do certainly want to have greater exposure to these types of assets on our balance sheet and I wouldn't expect no dramatic changes from here around how we've allocated our balance sheet today.
Great. Thank you. Thank you.
Our next question is from Chris Kotowski with Oppenheimer.
Yeah. Good morning, Thank you.
I know these numbers bounce around quite a bit but you know normally a your realized carry is like four or five times. The good level of realized balance sheet gains and this quarter. They were almost almost equal and I'm. Just wondering is that did that have.
I was trying to figure out where that came from and why that is and should we expect to see a kind of.
A shift.
Towards more realizations.
In the coming quarters.
Hey, Chris Thanks for the question no I don't I don't think that's a fundamental shift I think that's just like in one quarter at a time, we had no meaningful balance sheet realization I'm thrilled that our stake in a hot group and while that is invested across our broader platform as it was certainly a weighted towards our balance sheet and so I would not.
I would expect this to be necessarily a trend on a go forward basis.
At least in the near term as our balance sheet continues the evolution into one that is going to be compounding in nature at some point in time in the future you know as Weve.
Completed I would say that evolution I've I've moving from a balance sheet that is generating cash and one that is compounding over time that compounds the balance sheet.
Will mature to the point, where it's generating meaningfully more cash out, but that's but that's sort of the next stage of our growth profile here for the foreseeable future I think the expectation we continue to be the carriers yet on how they games to balance sheet income.
Okay, Great and then I'd add it's always it's always felt from me like we have multiple ways to win.
And you know this was a quarter, where I think you're right investment income and balance sheet performance contributed to de while we still saw significant book value compounding in capital markets. In addition had a very strong quarter. So it's it's you know weve talked about how we think the business model is really wonderfully resilient and I think you know this is this this quarter those items were both.
Great examples.
Yeah, and then I was also curious if you can discuss it.
Just why the odd kind of like two part exit from Epicor with with first the dividend recap and and and then a sale process.
That tax driven or <unk> or if he if you're going to sell something why would one to a dividend recap immediately in front of that.
Hey, Chris said, it was not tax dividend and with that.
I think too much any specific situation.
We were able to get something done that drove liquidity back to the from a capital structure that was portable for a new buyer and it just so happened that we were able to exit at a a couple of months later on so there is nothing.
That is specifically unusual about that transaction.
Okay. All right. That's it for me. Thank you. Thank you Chris.
Our next question is from Chris Harris with Wells Fargo.
Thanks, a lot guys.
So with the news out there that Aries is bidding for M. P. I was hoping you could give us your updated thoughts on how you guys are thinking about M&A at this point.
Are you open to deals are you looking at deals or is the main focus right now primarily golf club Atlantic.
Hey, Chris its Scott Thanks for the question.
Yeah, we do have a lot of work to do on the global Atlantic front, but the the answer your questions. We continue to look for new opportunities.
You know that the bar remains very high but you know we will continue to focus on some there as we've talked about in the past you know growth areas for us like real estate some.
Some of the other kind of adjacent parts of that space around but its secondaries or co invest.
And then you know overtime you should continue to expect us to be thinking about.
Through and with global Atlantic, whether there's more things to do and insurance. So we're continuing to look and we'll keep you posted but we're.
We're definitely are still out there.
Our next question is from Robert Lee with KBW.
[noise] Reno good morning, everyone. Thanks for taking my questions and your patience jurors are actually of course from Marshall Wace, I mean, I know that slide here yesterday from September that.
It's pretty phenomenal growth acute maybe just update us on maybe what the contribution was this quarter and there's still and then kind of how you are you working with them and then an age.
I'm still an opportunity.
Increased your stake in that March was.
Hey, Rob.
Well I'll take the first part of that and I think Scott is going to take how we're working together.
So I punched side is the business is performing very well north of 45 billion I bet, you and today, we have a 40% share in that and you're seeing that flow through our financial results in a couple of ways.
Through most of the here you're seeing it flow through on our pro rata share of management fees, what you'll see and a little bit of incentive fees along the way their performance year end.
Is the end of September and so what you'll see in our financials. In Q4, I is an elevated level of incentive fees, which is our pro rata share of Marshall wace incentive fees and that was in the two.
250 plus million odd.
Number that I gave earlier on this call around our our pipeline of visibility.
Yeah, the only thing I'd add Rob [noise] as and thanks for the comment I think you know that the Marshall Wace management team has done a fantastic job.
Growing the business navigating this environment and continuing to grow the firm. We have continued to work together on a number of different fronts.
It's it's been a great partnership and you know its been a satisfying in terms of the discussions we have about markets and continue to explore ways to do more strategically together, but you know it's also been you know a a partnership through which you know its had a very nice economic return.
For the investment that we've made off the balance sheet.
In terms of the question about raising the snake. The initial phase of the transaction was for us to invest 24.9% that was scheduled went up to where we are now which is about 40%. There's no near term plan to change that that may always change over time.
Great and then maybe just a follow up question and you.
Can't <unk> conference call about E G coming up I guess, but you.
You know when thinking about you know you had the announcement they bad in India The Bulls platform.
On.
Just more broadly how do you think of that.
Arms.
Does this mean you whether it's.
Or how are you incorporating some of the principles and kind of you know.
Then your strategies and you know.
On the private investment side, probably but I since I was here.
[music].
No more important or similar to what you're seeing on the public investing side it sounds as though he's really focusing on those capabilities.
Brady easier process.
Hey, Rob it's Craig on Garden put aside I think.
There are ours.
Our two things to understand first.
You know, we as a firm have been focused on E.S.P. since 2008 so.
So at this point, we have over a decade of experience in driving.
And protecting value through yesterday management, and we believe we've established ourselves as the clear leader in these areas.
And what it means at this point is within our firm Lucky S.G. considerations are integrated within the decision, making is taking place everyday within our deal teams in our investment committees on a global basis. So these are one off items one off projects. It's part of the mindset of our teams as we evaluate opportunities.
And look to execute and create value.
And I think the second point is really as a result of all of this work you know we were finding good investment opportunities through the work that everyone was doing but there are cases, when we didnt have a home for these investments so you're right. We've we've created a business around this that's a rent pack business.
That's a strategy that is focused on opportunities to generate private equity like returns, while driving positive impact at the same time not see opportunity.
So you know earlier this year, we held our final close I think it was February on our impact funds.
And we're off to a very good start and I think as it relates to trends and dynamics from a public shareholder standpoint from an L.P. standpoint et cetera. All these considerations in genetics are only increasing I think an important and increasing in terms of focus from third party constituents consist of.
With what I expect you're hearing from others.
Great. Thanks, Greg Thanks for taking my question.
Thank you.
Our next question is from Mike Cyprus with Morgan Stanley.
Hi, Good morning, Thanks for taking the question wanted to follow up on the strong investment returns you guys posted today and touched on earlier I was just hoping you can elaborate a bit more on your views on the investment return outlook on both the existing investments there that are in the ground and also the new capital that you're putting to work today in terms of what sort of returns do you expect.
<unk> to generate across the different types of strategies that you're managing and how is the attribution of those returns are evolving.
Hey, Mike It's Scott. Thanks for the question look I think that the.
Short answer to the first part of the question is that we continue to see a lot of upside in the portfolio and as you can tell from the amount of deployment. We've had this year you know 42 billion in total terms.
Closed in and announced transactions, we've been deploying more capital into those investment themes that we think have a has a lot of legs. So.
The opportunity to continue to generate attractive returns from here, we think is very attractive.
We believe that it's you know going to be continued to be driven by having the exposures the parts of the economy globally.
Where we see those long term trends playing out and we think our glow ballot. He is going to help you know the fact to Rob's point that the deployments and about a third a third a third U.S. and Europe Asia. We think also will help the returns on a go forward basis and most investors I think look at us and know how we're performing relative to the public markets.
When you look at our private markets returns and that's you know I think our expectation is you know we can continue to outperform nicely and hopefully meet beat beat their hurdles and in terms of the go forward opportunity. We continue to stay focused on a number of those themes and continue to involve them all the time and it kind of the metal level, there's the investment themes, but.
The thing, we probably should talk about more on these calls is our growing real assets businesses, where you know we are seeing real opportunities to invest in real assets with yield and.
That's part of the reason, you're seeing such growth in our infrastructure and realistic businesses in particular.
Great. Thank you.
Thank you.
Our next question is a follow up from Patrick Davitt with Autonomous research.
Hey, Thanks for the follow up I have a quick follow up on that the tax question. I think you know obviously the public shareholders. The changing it's really just the change in the corporate rate that impacts us, but as you think about a potential change in the capital gains.
Our tax rate would that cause any kind of rethink of how the balance sheet growth strategy works for your kind of internally or not.
No no change in how we would short answer no change in how we do evaluate opportunities in our balance sheet strategy.
Okay. Thanks.
And we have a follow up question from my side of course with Morgan Stanley.
Hi, Thanks for taking the follow up just wanted to ask about the up the balance sheet. If you guys gave are able to share with us the amount of capital that was deployed off the balance sheet in the quarter and also how much was that was monetized from the balance sheet. Thanks.
Yeah sure no problem in the quarter, we deployed a little bit more than 800 million of cap it off the balance sheet and we realized a 360 million.
Yeah, So Mike.
Great. Thanks, so much yeah of course.
Ladies and gentlemen, we have reached the end of the question and answer session.
Like to turn the call back to Craig Larson for closing remarks.
Just would like to thank.
Thank everybody for joining us if you have any follow ups. We look forward to following up with you directly please reach out directly and thank you once again bye bye.
Thank you. This concludes today's conference. Thank you for your participation you may disconnect your lines at this time.