Q4 2023 KKR & Co Inc Earnings Call

Ladies and gentlemen, thank you were standing by welcome to Kkr's fourth quarter 2023 earnings Conference call.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to KKR's fourth quarter 2023 earnings conference call. During today's presentation, all parties will be in a listen-only mode.

During todays presentation, all parties will be in a listen only mode. Following management's prepared remarks, the conference will be opened for questions.

Operator: Following management's prepared remarks, the conference will be open to questions. If you would like to ask a question at that time, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star key.

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Operator: Please note this conference is being recorded. I'll now hand the call over to Craig Larson, partner at Head Investor Relations for KKR. Craig, please go ahead.

Please note this conference is being recorded.

I'll now hand, the call over to Craig Larson partner and head of Investor Relations for KKR.

Craig Larson: Craig. Please go ahead.

Craig Larson: Thank you, operator. Good morning, everyone, and welcome to our fourth quarter 2023 earnings. This morning, as usual, I'm joined by Rob Lewin, our Chief Financial Officer. Scott Nuttall, our Co-Chief Executive. We'd like to remind everyone that we will refer to non-GAAP measures on the call which are reconciled to GAAP figures in our press release, which is available in the Investor Center section at KKR.com. And as a reminder, we report our segment numbers on an adjusted share basis. This call will contain forward-looking statements that do not guarantee future events or performance. Please refer to our earnings release and our SEC filings for cautionary factors about. And as a reminder, our earnings release and our financial reporting for Q4 is consistent with past quarters. Beginning in Q1 of 2024, our earnings release will reflect the segment and financial metric changes we announced on November 29th. Turning now to our numbers for the quarter.

Craig Larson: Thank you operator.

Craig Larson: Morning, everyone and welcome to our fourth quarter 2023 earnings call. This morning, as usual I'm joined by Rob Lewin, Our Chief Financial Officer.

Craig Larson: Scott Nuttall, our co Chief Executive Officer.

Craig Larson: We'd like to remind everyone that we will refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our press release, which is available on the Investor Center section at KKR Com.

Craig Larson: And as a reminder, we report our segment numbers on an adjusted share basis.

This call will contain forward looking statements, which do not guarantee future events or performance.

Craig Larson: Please refer to our earnings release, and our SEC filings for cautionary factors about these statements.

Craig Larson: And as a reminder, our earnings release and our financial reporting for Q4 and is consistent with past quarters.

Craig Larson: Getting into Q1 of 'twenty 'twenty four and earnings release will reflect the segment and financial metric changes, we announced on November 29.

Craig Larson: Turning now to our numbers for the quarter.

Craig Larson: We're pleased to be reporting strong fourth quarter results with fee-related earnings per share of 76%. This is a record figure for KKR of 21% from Q3 2023, as well as Q4 of 2022. After Tax Distributable Earnings came in at $1 per share.

Craig Larson: We're pleased to be reporting strong fourth quarter results with fee related earnings per share of 76 cents.

Craig Larson: This is a record figure for Q T R. 21% from Q3 2023.

Craig Larson: Well as Q4 of 2022.

Craig Larson: After tax distributable earnings came in at $1 per share.

Craig Larson: New capital raised in the quarter was $31 billion, which is also particularly strong. So overall, a really solid quarter. I'll begin this morning by walking through our financials in a little more detail. So our management fees for the quarter are $785 million. That's up 3.4% compared to just last quarter with growth across all of our businesses. And comparing full year 23 to 2022, management fees grew 14%. We have reported double-digit percentage annual growth in our management fees for several consecutive years. Net transaction and monitoring fees were $264 million in the quarter.

Craig Larson: New capital raised in the quarter was 31 billion, which is also particularly strong so overall, a really solid quarter for us.

Speaker Change: I'll begin this morning by walking through our financials in a little more detail.

Speaker Change: So management fees in the corner or 785 million, that's up three 4% compared to just last quarter with growth across all of our business lives.

Speaker Change: And comparing full year 'twenty three to 2022.

Speaker Change: Management fees grew 14%.

Speaker Change: We reported double digit percentage annual growth in our management fees for several consecutive years now.

Speaker Change: Net transaction and monitoring fees were 264 million in the quarter.

Craig Larson: Capital markets transaction fees, in particular, were quite strong in Q4, with $225 million of revenue. That was driven by an increase in investment activity and financing transactions at several of our PE and Core PE portfolios. John Toto, Fee-related revenues for the quarter were $1.1 billion, up 17% on a year-over-year basis, so compared to Q4 of 2022. TURNING TO EXPENSIVE... Fee-related compensation, as usual, was at the midpoint of our guided range at 22.5% of fee-related revenues for the quarter, as well as for the year. Other operating expenses were $156 million.

Speaker Change: Capital markets transaction fees in particular were quite strong in Q4 with 225 million of revenue.

Speaker Change: That was driven by an increase in investment activity and financing transactions at several of our P E and <unk> portfolio companies. So in total.

Speaker Change: Do you related revenues for the quarter were $1 1 billion up 17.

Speaker Change: Percent on a year over year basis, so compared to Q4 of 2022.

Speaker Change: Turning to expenses.

Speaker Change: Fee related compensation as usual it was at the midpoint of our guided range in 'twenty, two and a half a fee related revenues for the quarter as well as for the year.

Speaker Change: Other operating expenses were 156 million.

Speaker Change: So in total fee related earnings were $675 million or 76 per share.

Craig Larson: So in total, fee-related earnings were $675 million, or 76 cents per share. As I mentioned just a moment ago, this was a record FRE quarter for us, and this growth really highlights, in our view, the continued strength as well as the diversification that you're seeing. The referee margin in the quarter came in at 63%, and on a per share basis, FRA was $2.68 for the year.

Speaker Change: As I mentioned, just a moment ago. This was a record every quarter for us and this was really highlights in our view of the continued strength as well as the diversification that you're seeing across the sir.

Speaker Change: I ran for your margin in the quarter came in at 63% and on a per share basis FRE was $2.68 for the year.

Craig Larson: Turning now to the Realization Act. For the quarter, we generated $411 million of realized performance income. This was driven by multiple successful sales across our traditional private equity and core businesses, with realized incentive fees driven by martial waste in the fourth quarter. Realized investment income in the quarter was $147 million. So together, monetizations were $558 million. In total, asset management operating earnings were $970 million.

Speaker Change: Turning now to realization activity.

Speaker Change: For the quarter, we generated $411 million realized performance income.

Speaker Change: This was driven by multiple successful sales across our traditional private equity and core businesses.

Speaker Change: With realized incentive fees driven by Marshall Wace in the fourth quarter.

Speaker Change: Realized investment income in the quarter was 147 million, so together monetization for $558 million.

In total asset management operating earnings were $970 million.

Craig Larson: Moving to our insurance segment, performance continued to be strong in the quarter with $231 million of pre-tax earnings, that's up 10% quarter over quarter. This was the result of stronger net inflows across both the institutional and individual channels as well as variable investment income from the sale of a solo developer that generated $16 million of insurance segment pre-tax operating earnings. So in total, after-tax DE was $888 million, or $1 per share.

Speaker Change: Moving to our insurance segment performance continued to be strong in the quarter with $231 million of pre tax earnings.

Speaker Change: Up 10% quarter over quarter.

This was the result of stronger net inflows across both institutional and individual channels as well as variable investment income from the sale of a solar developer that generated $16 million of insurance segment pre tax operating earnings.

Speaker Change: So in total after tax <unk> was $888 million or $1 per share.

Craig Larson: In comparison with the prior quarter, that figure was up 14%. Next, turning to investment performance, you can see this on page 7 of the earnings release. The private equity portfolio appreciated 3% in the quarter and 16% in the year. In real assets, the opportunistic real estate portfolio was down one in the quarter and down two for the year.

Speaker Change: Comparison with the prior quarter that figure was up 14%.

Speaker Change: Next turning to investment performance you can see this on page seven of the earnings release.

Speaker Change: Private equity portfolio appreciated, 3% in the quarter and 16% in the year.

Speaker Change: In real assets, the opportunistic real estate portfolio was down one in the quarter and down two for the year.

Speaker Change: Infrastructure was up 5% in the quarter and up 18% for the year, So very strong broad performance across our infrastructure platforms.

Craig Larson: Infrastructure was up 5% in the quarter and up 18% for the year. So, very strong broad performance across our infrastructure platform. And in credit, the leveraged credit composite was up 3%, and the alternative credit composite was up 2%. And over the year, performance here was up 14 and 10 percent. And finally, consistent with our historical practice, we are intending to increase our annual dividend from $0.66 to $0.70 per share, which we anticipate will go into effect alongside our first quarter 2024 earnings. And with that, I'm pleased to turn the call over to Craig. Thanks a lot, Craig, and good morning, everyone.

Speaker Change: Any credit and leveraged credit composite was up three and the alternative credit composite was up 2%.

Speaker Change: Over the year performance here was up 14, and 10% respectively.

Speaker Change: And finally consistent with our historical practice, we are intending to increase our annual dividend from 66 cents to <unk> 70 per share.

Speaker Change: Should we anticipate will go into effect alongside first quarter 2020 for earnings.

Speaker Change: With that I'm pleased to turn the call over to Rob.

Robert H. Lewin: Thanks, a lot Craig Hey, good morning, everyone.

Scott Charles Nuttall: First, looking at our key operating metrics. New capital raised, total $31 billion for the quarter. These results are quite strong and encouraging for us as we head into 2020. Credit & Liquid Strategies made up about two-thirds of the capital we raised this quarter, as our business has grown with Global Atlantic as a significant partner. GA in particular had record inflows in the quarter, both overall and specifically from the individual channel.

Robert H. Lewin: First looking at our key operating metrics.

Robert H. Lewin: New capital raised totaled 31 billion for the quarter.

Robert H. Lewin: These results are quite strong.

Robert H. Lewin: And encouraging for us as we head into 2024.

Speaker Change: Credit illiquid strategies made up about two thirds of the capital we raised this quarter.

Speaker Change: As our business has grown with global Atlantic is a significant part.

Speaker Change: Jamie in particular had record inflows in the quarter, both overall and specifically from the individual channel.

Scott Charles Nuttall: So activity here continues to be very strong. Block activity at GA is also active. As you know, the MetLife block closed in the quarter, and the Manulife block transaction is expected to close sometime in the first half of 2024. And similar to prior blocks, GA continues to be very capital efficient here. Contributing approximately 25% of the equity in both transactions, with 75% of the capital coming from IV vehicles and additional co-investors. Hence 75% from third parties, where we can earn management fees and have the opportunity for performance income as well. Over the past year, new capital raised totaled right around $70 billion. And looking ahead to 1231, we just announced the final close of Asia Infrastructure 2 at approximately $6.4 billion, over 65% larger than the previous fund.

Speaker Change: So activity here continues to be very strong.

Speaker Change: Block activity at GAA is also active.

Speaker Change: As you know the Metlife block closed in the quarter and the Manulife block transactions is expected to close sometime in the first half of 2024.

Speaker Change: And similar to prior blocks J continues to be very capital efficient here.

Speaker Change: Contributing approximately 25% of the equity in both transactions with 75% of the capital coming from IV vehicles on additional co investors.

Speaker Change: So 75% from third parties, where we can earn management fees and the opportunity for performance income as well.

Speaker Change: Over the past year, new capital raised totaled right around 70 billion.

Speaker Change: And looking post 12, 31, we just announced the final closing in Asia infrastructure to add approximately $6 4 billion over 65% larger than the previous funds.

Speaker Change: Of note more than half of the capital came from new investors to the Asia infrastructure platform.

Scott Charles Nuttall: Of note, more than half of the capital came from new investors to the Asia Infrastructure Platform. With this successful fundraise, we are clearly the largest infrastructure fund in the region. Enhancing our Asian positioning more broadly. And as we look out over the next 12 months and into 2025, a number of our flagship funds will be raising capital as well. So we continue to expect an acceleration in our fundraising from here. Turning to Capital Invested, we've deployed $16 billion in the quarter and $44 billion for the year. Capital Invested was really diversified across private equity, real assets, and credit and liquid strategies during the year, as U.S. private equity and core private equity deployment rebounded in the quarter.

Speaker Change: With the successful fund raise we are clearly the largest infrastructure fund in the region.

Speaker Change: At <unk>, our Asia positioning more broadly.

Speaker Change: And as we look out over the next 12 months and into 2025.

Speaker Change: Our flagship funds won't be raising capital as well.

Speaker Change: So we continue to expect an acceleration of our fundraising from here.

Turning to capital invested.

Speaker Change: Deployed 16 billion in the quarter and 44 billion for the year.

Capital invested was really diversified across private equity real assets and credit and liquid strategies in the year.

Speaker Change: Private equity and core private equity deployment rebounded in the quarter.

Scott Charles Nuttall: Of particular note, we made investments in three TIC private transactions in Q4. And with almost $100 billion of uncalled capital, we continue to be well positioned for the deployment opportunities that are ahead. I wanted to briefly shift now to a reflection on our progress through the course of 2023. Our assets under management now total $553 billion. That's up 10% compared to the end of 2022, with sizable capital raised in the past year. Fee-paying AUM now stands at almost $450 billion. Given our consistent growth in fee-paying AUM, management fees increased 14% in 2023 with line of sight of future growth from approximately $40 billion of committed capital that becomes fee-paying as it's invested or when it enters its investment period. And that's at a weighted average rate of just over 90 basis points.

Speaker Change: Of particular note we made investments in three take private transactions in Q4.

Speaker Change: And with almost $100 billion of Uncalled capital, we continue to be well positioned for the deployment opportunities that are ahead.

Speaker Change: I wanted to briefly shift now to a reflection on our progress through the course of 2023.

Speaker Change: Our assets under management now totaled 553 billion.

Speaker Change: That's up 10% compared to the end of 2022.

Speaker Change: With sizeable capital raised in the past year.

Speaker Change: Fee paying AUM now stands at almost 450 billion.

Speaker Change: Given our consistent growth in fee paying AUM management fees increased 14% in 2023.

Speaker Change: Line of sight of future growth from approximately 40 billion of committed capital that becomes fee paying assets invested or when it enters its investment period.

Speaker Change: And that's at a weighted average rate of just over 90 basis points.

Speaker Change: And while realized performance in investment income was more muted in 2023, given the environment. Our forward visibility has increased meaningfully year over year.

Scott Charles Nuttall: And while realized performance and investment income were more muted in 2023, given the environment, our forward visibility has increased meaningfully year over year. Total embedded gains were $12.3 billion at year end. That reflects embedded gains on our balance sheet plus gross unrealized carried interest, which was up almost 40% compared to Q4 of 2022. The opportunity for future investing revenue remains robust, and strategically, we made a lot of progress in 2023. As you likely know, we announced four key initiatives towards the end of November. As an update, on January 2nd, we closed on our acquisition of the remaining stake in Global Atlantic for approximately $2.6 billion in cash. We believe this acquisition will create more value for policyholders and shareholders and are excited to unlock future potential together, concurrent with the closing of GA. We have created a new strategic holding segment, which you will see in our Q1 2024 earnings release. Here, the segment operating earnings will be driven by cash dividends from our Core P portfolio.

Speaker Change: Total embedded gains were $12 3 billion at year end.

Speaker Change: That reflects embedded gains on our balance sheet plus gross unrealized carried interests.

Speaker Change: This was up almost 40% compared to Q4 of 2022.

Speaker Change: The opportunity for future investing revenue remains robust.

Speaker Change: And strategically we made a lot of progress in 2023.

Speaker Change: As you likely know we announced four key initiatives towards the end of November.

Speaker Change: As an update.

Speaker Change: January 2nd we closed on our acquisition of the remaining stake in global Atlantic for approximately $2 6 billion in cash.

Speaker Change: We believe this acquisition will create more value for policyholders and shareholders and are excited to unlock future potential together.

Concurrent with the closing of <unk>.

Speaker Change: We have created a new strategic holding sack segment.

You will see in our Q1 2024 earnings release.

Speaker Change: The segment operating earnings will be driven by cash dividends from our core portfolio.

Scott Charles Nuttall: We also revised our compensation ratios, which will be reflected in our Q1 financials, driving even more alignment between our compensation model and the outcomes of our clients. Combining these aspects, we will be introducing a new reporting framework that will better highlight our business model. This will include a new financial metric, total operating earnings, which represents our more recurring forms of income.

Speaker Change: We also revised our compensation ratios, which similarly will be reflected in our Q1 financials.

Speaker Change: Bring more FRE each of our shareholders and driving even more alignment between our compensation model and the <unk>.

Speaker Change: <unk> of our clients.

Speaker Change: Combining these aspects we will be introducing a new reporting framework that will better highlight our business model.

Speaker Change: This will include a new financial metric total operating earnings.

Speaker Change: Which represents our more recurring forms of income.

Scott Charles Nuttall: Prior to our next earnings call, we will provide recast financials to help you further understand the various key metrics. As a reminder, we do expect these announcements to be accretive to all of our per share metrics. And together with the confidence and current visibility we have, it is what allowed us to increase our 2026 FRE per share target to $4.50 plus per share. In 2023, we generate $2.68 per share of FRE.

Speaker Change: Prior to our next earnings call, we won't provide recast financials to help you further understand the various key metrics.

Speaker Change: As a reminder, we do expect these announcements to be accretive to all of our per share metrics and together with the confidence and current visibility. We have is what allowed us to increase our 2026 FRE per share target to $4 50 plus per share.

Speaker Change: In 2023, we generated $2 68 per share of FRE.

Scott Charles Nuttall: So our expectation is for a lot of growth from here. Given these four announcements, paired with the existing growth engines we have, we believe that we are well set up to drive meaningful scale.

Speaker Change: So our expectation is for a lot of growth from here.

Speaker Change: Given these four announcements paired with the existing growth engines, we have we.

Speaker Change: We believe that we are well set up to drive meaningful scale.

Scott Charles Nuttall: The opportunities we have across asset management, insurance, and strategic holdings are multifold. Turning first to our asset management business, there remains a lot of upside here with multiple drivers of growth. We have a lot of younger strategies that are just beginning to scale.

Speaker Change: The opportunities we have across asset management insurance and strategic holdings are multifold.

Speaker Change: Turning first to our asset management business, there remains a lot of upside here with multiple drivers of growth.

Speaker Change: We have a lot of younger strategies that are just beginning to scale.

Scott Charles Nuttall: We started 25 or so investing businesses in the past decade alone, and many are now starting to inflect. We are in asset classes and geographies with massive end markets. Asia, Infrastructure, including Climate, and Credit are all great examples.

Speaker Change: You started 25 or so investing businesses through the past decade alone and many are now starting to inflect.

Speaker Change: We are in the asset classes and geographies with massive end markets.

Speaker Change: Asia infrastructure, including climate and credit are all great. Examples.

Scott Charles Nuttall: And as a reminder, we only want to be competing in areas with large addressable markets and where we have conviction that we can be a top three player. We are in the early days of tapping into the private wealth end market. We've had early success with our K-Series suite of products, with a tremendous amount of opportunity that is still in front of us with these growth avenues. Along with our strong track record, talent, and the trust that we've built with our clients.

Speaker Change: And as a reminder, we only want to be competing in areas with large addressable markets and where we have conviction that we can be a top three player.

Speaker Change: We are in the early days of tapping into the private wealth and market.

Speaker Change: We've had early success in our case series suite of products with a tremendous amount of opportunity that is still in front of us.

Speaker Change: With these growth avenues.

Speaker Change: Along with our strong track record.

Speaker Change: And the trust that we've built with our clients we feel that we can double our asset management business from here.

Scott Charles Nuttall: We feel that we could double our asset management business from here, and that's without starting anything new. Second, we have a meaningful opportunity in insurance with our partnership with Global Atlantic. Insurance is a very powerful contributor to our business.

Speaker Change: And thats without starting anything new.

Speaker Change: Second we have a meaningful opportunity in insurance with our partnership with global Atlantic.

Speaker Change: Insurance is a very powerful contributor to our business.

Scott Charles Nuttall: GA has already created a lot of value, going from $72 billion of assets under management at our announcement of the initial transaction in July of 2020 to over $170 billion of assets under management today, including the pending Manulife block. We have a strong opportunity to unlock even more value together in investing, product development, global expansion, private wealth distribution, and capital markets. And we are still in the very early stages of our partnership.

Speaker Change: Jay has already created a lot of value going from 72 billion of assets under management at our announcement of the initial transaction in July of 2020 to over $170 billion of assets under management today, including the pending Manulife block deal.

Speaker Change: We have a strong opportunity to unlock even more value together.

Speaker Change: Product development global expansion.

Speaker Change: Wealth distribution and capital markets.

Speaker Change: And we are still in the very early stages of our partnership.

Scott Charles Nuttall: And finally, number three, strategic holdings, where our opportunity is highly differentiated. This segment leverages all of our people, capabilities, and our collaborative culture. As a result, we are uniquely positioned to capitalize on what we believe is a huge addressable market. And that's in addition to the current visibility we already have to drive net dividends in this segment of $300 million plus by 2026 and $600 million plus by 2028. In summary, we are incredibly well positioned as a firm, and we really don't think there are many companies in our industry or others that have the type of visibility that we have for long-term growth. We have a high level of confidence that we can meaningfully grow all three of our businesses, Asset Management, Insurance, and Strategic Holdings. With that, we are excited to announce we are going to host an Investor Day in New York on April 10th.

Speaker Change: And finally number three strategic holdings, where our opportunity is highly differentiated.

Speaker Change: This segment Leverages all of our people capabilities and our collaborative culture.

As a result, we are uniquely positioned to capitalize on what we believe is a huge addressable market.

Speaker Change: And that's in addition to the current visibility we already have to drive net dividends in this segment of 300 plus million by 2026, and 600 plus million.

Speaker Change: 2028.

Speaker Change: In summary.

Speaker Change: We are incredibly well positioned as a firm.

Speaker Change: And we really don't think there are many companies.

Speaker Change: Our industry or others.

Speaker Change: The visibility that we have for long term growth.

Speaker Change: We have a high level of confidence that we can meaningfully grow all three of our business segments asset management insurance and strategic holdings.

Speaker Change: With that we are excited to announce we're going to host an investor day in New York on April 10.

Operator: Given the November strategic announcement and all of the opportunities across our firm, we thought it would be timely for you to hear directly from our senior leaders. We will provide additional detail in the coming months and hope that you will join our broader team as we discuss our outlook and these opportunities. With that said, Scott Craig and I are happy to take your questions. Thank you. We will now be conducting the question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue.

Speaker Change: Given the November strategic announcements and all of the opportunities across our firm we thought it would be timely for you to hear directly from our senior leaders.

Speaker Change: We will provide additional detail in the coming months and hope that you will join our broader team as we discuss our outlook and these opportunities.

Speaker Change: With that Scott, Craig and I are happy to take your questions.

Scott Charles Nuttall: Thank you well now be conducting the question and answer session.

Speaker Change: You'd like to ask a question. Please press star one from your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Speaker Change: Let me first start to feel like you're move your question from the queue.

Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Operator: For participants who are using speaker equipment, it may be necessary to pick up your handset before pressing the star key so we may address questions to as many participants as possible. We ask you please limit yourself to one question. If you have additional questions, you may recur, and, time permitting, those questions will be addressed. One moment, please, while we poll for questions. Thank you, and our first question today will be from the line of Craig Siegenthaler with Bank of America. Please proceed with your question. Scott Robins, I'm for an update on fundraisers, large. We have global in for five, with four that are already there, https://www.kenhub.com and Asia Fine. So how should we think about the time?

Speaker Change: So you may ask questions from as many participants as possible. We ask you. Please limit yourself to one question if.

Speaker Change: If you have additional questions you may re queue time permitting those questions will be addressed.

Speaker Change: One moment, please can we poll for questions.

Speaker Change: Yeah.

Speaker Change: Thank you and our first question today will be from the line of Craig Siegenthaler with Bank of America. Please proceed with your question.

Craig Siegenthaler: Good morning, Scott, Rob Hope, you're both doing well.

Craig Siegenthaler: Hi, Greg.

Craig Siegenthaler: We were looking for an update on fund raising for your three largest flagships. So we have globally for five with four that's already 60% invested it's higher when you look at the committed.

Speaker Change: Any easier five and North America, <unk>, which are both over.

Speaker Change: Over 40% now so how should we think about the timing of these these fund raises given the commitment levels.

Speaker Change: On a whim targets given the size of the prior funds, they're all large funds.

Craig Larson: NAUM TARG, prior funds. And more importantly, how should we think about the FRE ramp from these new... 12, Morning, Craig. It's Craig.

Speaker Change: And more importantly, how should we think about the FRE ramp from these new funds.

Speaker Change: Step downs from Alaska.

Craig Larson: Why don't I start on that? First, look, one of the things that run through our minds as it relates to the trajectory of new capital raised, And you would have heard this in the prepared remarks from Rob as it relates to the topic, which relates to our flagship strategies. So when you look at the largest fund complexes within our firm, so Americas, Europe, Asia PE, Core PE, Infrastructure, less than $1 billion of the capital that we raised last year, we raised $70 billion in total; less than $1 billion of that came from those strategies. And if you look at 22 and 23, we raised round numbers $150 billion of new capital, and around $6 billion came from those flagships. And so, as we think about 24 and 25, we think that that's going to look different.

Speaker Change: Good morning, Craig, It's Craig why don't I start on that.

Craig: The first one look one of the things that run through your mind as it relates to the trajectory of new capital raised and you would have heard this in the prepared remarks from Rob relates to the topic.

Craig: As it relates to our flagship strategies.

Craig: So when you look at the largest fund complexes within our firm So Americas Europe Asia P/e Corp, <unk> infrastructure.

Craig: Less than $1 billion of the capital that we raised last year, we raised $70 billion in total less than $1 billion of that came from those strategies.

And if you look over 'twenty, two and 'twenty three we raised round numbers $150 billion of new capital and around 6 billion came from those flagships and so as we think about 'twenty four and 'twenty five.

Craig: We think that that's going to look different and so we are actively fund raising for our infrastructure strategy and do you expect to launch fund raising for our Americas private equity strategy later in the year.

Craig Larson: And so, we are actively fundraising for our infrastructure strategy and do expect to launch fundraising for our America's private equity strategy later in the year with Asia likely a 2025 initiative for us. On the deployment numbers you mentioned, those numbers are always a little understated. I remember if we have platform investments, et cetera, that capital is going to be spoken for, or if there happens to be capital drawn under the line, that capital is going to be paid back inside of 180 days. Again, that capital will be additive. So, those deployment numbers always look a little more understated relative to how we think of that positioning. And then I think there are a couple of other points here.

Craig: With Asia likely.

Craig: 25 initiative for us on the deployment numbers you mentioned those numbers are always a little understated I remember if we have platform investments et cetera that capital is going to be spoken for or if there happens to be capital drawn under the line that's going to be paid back inside of 180 days again that capital will be additives to those deployment numbers.

Craig: Always look a little more understated relative to how we think of that positioning and then I think there is a couple of other points here. The next one would relate to scaling.

Craig Larson: The next one would relate to scaling. You know, we mentioned in our press release that we had the final closes on our next gen tech three and impact strategies. We had nice growth in those strategies compared to their prior vintages.

Craig: We mentioned in our press release that we had the final close on our next Gen Tech three an impact strategies right now.

Craig: This scale again, those strategies compared to their prior vintages again, Rob talked about the good news as it relates to Asia infrastructure for US we do expect scaling in our wealth strategies alongside of that and then finally, we feel like we have a lot of momentum at global Atlantic both in the individual as well as the institutional channels. So I think the opportunities.

Craig Larson: Again, Rob talked about the good news as it relates to Asia infrastructure for us. We do expect scaling in our wealth strategies alongside of that. And then finally, we feel like we have a lot of momentum at Global Atlantic both in the individual as well as the institutional channels. So, I think the opportunities that we see for new capital raised and, in turn, management fee growth are really an attractive part of our positioning, with the flagship certainly being an important part of that. Good morning, Craig. It's Rob.

Craig: We see for new capital raised and then turned management fee growth.

Craig: Really an attractive part of our positioning with our flagship certainly being an important part of that.

Craig: Good morning, Greg, It's Rob I'll pick up as it relates to your question on FRE. So when you look at some of these big flagships that will be in the market and their predecessor funds. They don't have big.

Robert H. Lewin: I'll pick up as it relates to your question on FRA. You know, when you look at some of these big flagships that'll be in the market and their predecessor funds, they don't have big step-downs in fee rates as they transition to the post-investment period. In addition to that, when you think about the runoff, a lot of the runoff from investment is probably going to come from two funds prior and three funds prior, those funds have closed out. But maybe taking it up a level, if you think about where we are today and where we're going, and I hit this in the prepared remarks, we're at $2.68 of FRE per share, and we've got it three years from now, And so in order to get there, our expectation is we're going to have a lot of management fee growth, and the flagships, on a net basis, will be a part of that story. The only thing I would add, Craig, is that I think our overall view on fundraising is quite optimistic. Craig Larson mentioned it, but...

Rob: Big step downs and fee rates.

Shannon said post investment period.

Rob: In addition to that when you think about the run off a lot of the runoff from investment is probably going to come from two funds prior and three funds prior to those funds.

Rob: Closeout, but maybe taking it up a level if you think about.

Rob: Where we are today and where we're going to hit this in the prepared remarks were $2 six to eight cents of FRE per share and we've guided three years from now we have an expectation of being at $4 50 per share and so in order to get there. Our expectation is we're going to have a lot of management fee growth and the flagships on a net basis, we'll be a part of that story.

Speaker Change: Yeah, the only thing I would add Craig and I think our overall view on fund raising is quite optimistic.

Craig Larson mentioned it but.

Robert H. Lewin: The $150 billion we raised, for 4% of that has come from Flagstaff, is a pretty low number that speaks to how we've been scaling the diversification of the firm. And as you know, a number of our strategies are kind of in this nice part of the inflection curve. 2, 3, 4, where we can see a significant amount of growth. So you're absolutely right to point out that the flagships are coming back at what we think is going to be a really good time.

Speaker Change: The 150 billion, we raised for 4% of that to come from flagships.

Speaker Change: Is it pretty low numbers speaks to how we've been scaling the diversification of the firm.

Speaker Change: And as you know a number of our strategies are kind of in this nice part of the inflection curve funds 234, where we can see a significant amount of growth. So youre absolutely right to point out the flagships are coming back.

Speaker Change: We think it's going to be a really good time, but we also have 22 of our <unk> strategies that are coming to market in the next 12 to 18 months, we've put in that younger category Fund 123 open ended these.

Scott Charles Nuttall: But we also have 22 of our 30 strategies that are coming to market in the next 12 to 18 months, https://www.patreon.com www.kenhub.com, And yet, on top of that, private wealth, GA, Asia. Speak to the optimism that we see, kind of regardless of what's happening, www.globalonenessproject.org. Our next question is from the line of Alex Blostein with Goldman Sachs. I am pleased to see you with your question. Hey, good morning, everybody.

These newer strategies and you can see in Asia and for a 66% <unk> growth was up 30% our impact doubled even in the environment that we saw over the last couple of years you add on top of that private wealth Gia Asia speaks to the optimism that we see kind of regardless of what's happening with the backdrop.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Alex Blaustein with Goldman Sachs. Please proceed with your question.

Craig Larson: Thanks for the question as well. I was hoping we could start with just building on your prior comments around expansion in the wealth channel. You mentioned you're seeing quite, quite a bit of success in the early days, only, you know, a couple of quarters on some of these platforms. So maybe talk a little bit about what products you expect to be out in the market with over the course of this year, how many platforms you're on, etc.

Alexander Blostein: Hey, good morning, everybody. Thanks for the question as well.

Alexander Blostein: Was hoping you could start with just building on your prior comments around expansion in the wealth channel you mentioned youre seeing quite quite a bit of success early days only a couple of quarters and some of these platform. So maybe talk a little bit about what products do you expect to be out in the market with over the course of this year.

Alexander Blostein: Many platforms Yuan et cetera, but also I guess more importantly, I believe in the past your targets for 2026 and half R&D really did not include a whole lot of contribution from these initiatives. So maybe just kind of confirm that and what do you think those initiatives could ultimately contribute overtime.

Craig Larson: But also, I guess, more importantly, I believe in the past, your targets for 2026 and FR&D really did not include a whole lot of contribution from these initiatives. So maybe just kind of confirm that, and what do you think those initiatives could ultimately contribute over time? Hey Alex, it's Craig. Why don't I start?

Alexander Blostein: Hey, Alex It's Craig why don't I start thanks for that.

Craig Larson: Thanks for that. And just stepping back and setting the level for everyone. So as of 1231, around $75 billion of our assets under management are from individuals, and that number does not include policyholders at Global Atlantic. So you could argue that that $75 billion, if anything, is understated as it relates to the presence and the activities we have with individuals broadly. Now, most of that $75 billion is from high net worth and ultra-high net worth individuals, as well as family offices that have invested in our funds and strategies. And in terms of our fundraising, in total, a double-digit percentage of our new capital raised historically has typically come from individuals, so it's been a healthy part of that fundraising activity. Now, back to your question. Specifically, and most recently, we introduced what we call our K-series suite of products. These are funds and strategies that are really designed and tailored specifically for wealthy investors. So K-Infra and KIF are U.S. and non-U.S. vehicles focused on infrastructure.

Craig: And just stepping back and level setting for everyone. So as of 12 31 around 75 billion of our assets under management.

Craig: Our from individuals and that number does not include policyholders of global Atlantic. So you could argue that that 75 billion. If anything is understated as it relates to the presence and the activities. We have with individuals' broadly now most of that 75 billion are from high net worth and ultra high net worth individuals as well as family offices that have invested.

Craig: In our funds and strategies and in terms of our fund raising in total a double digit percentage of our new capital raise historically has typically come from individuals. So it's been a healthy part of that fundraising activity now back to your question. Most specifically most recently we've introduced what we call our case series suite of <unk>.

Craig: And so these are funds and strategies that are really designed and tailored specifically for wealth investors.

Craig: Anne Frank Jeff are the U S and non U S vehicles focused on infrastructure.

Craig: And <unk> are the U S and non U S vehicles focused on private equity, we launched both private equity and infrastructure only midway through 2023.

Craig: Those products in real estate and credit on top of that.

Craig: As well as our private BDC soon to be launched.

Craig: Of a round of that 75 billion of wealth around $6 5 billion of that is from these case series suite of products now a year ago that was $2 4 billion. So we're in the early days, but we feel really good about the progress from here.

Craig Larson: K-Prime and KPEC are the U.S. and non-U.S. vehicles focused on private equity. We launched both private equity and infrastructure only midway through 2023. And with those products and real estate and credit on top of that, as well as our private BDC soon to be launched. [inaudible] We're raising about $500 million a month as we look at the K-series suite. And so, it feels like reception and interest in our momentum continue to feel really good. And to your point, we do expect to see an acceleration in the number of platforms in the first half of 24. So it's great progress.

Craig: As we look at some of the underlying statistics, that's particularly true as it relates to infrastructure and private equity, which are newer asset classes.

Craig: For more mass affluent investors as we've mentioned historically, we are raising about 500 million of months as we look at the case series suite and so it feels like reception and interest in our momentum continues to feel really good and to your point, we do expect to see an acceleration in the number of platforms in the first half of 'twenty four.

Craig: So it's great progress, but I think to us.

Craig Larson: But I think what is even more interesting to us is that long-term secular dynamic because mass affluent individual investors, historically, have not had an easy way to access these types of products and strategies. And so over the coming years, if we're correct, and you start to see allocations go from the low single digits to the mid single digits, that literally is trillions of dollars that have the potential to move to alternative products. And when we think of how we're positioned, given our brand, our track record, the investments that we've made in distribution and marketing, and our ability to innovate products, we feel really well positioned to be a winner in this space over the long term. Alex, as it relates to your question on our 2026 targets, historically, we haven't included much of anything as it relates to private wealth.

Craig: Even the more interesting part is really that long term secular dynamic.

Craig: Because mass affluent individual investors historically have not had an easy way to access these types of products and strategies and so over the coming years. If we're correct and you start to see allocations go from the low single digits to the mid single digits that literally is trillions of dollars that have the potential to move to.

Craig: Alternative products and when we think of how we are positioned given our brand our track record the investments that we've made in distribution and marketing our ability to product innovation, we feel really well positioned to be a winner in this space over the long term.

Speaker Change: Alex just as it relates to your question on our 2026 targets historically, we haven't included much of anything.

Speaker Change: Related to private wealth as we look forward given some of the early success that Craig just went through we do see some contribution coming over the next few years.

Robert H. Lewin: You know, as we look forward, given some of the early success that Craig just went through, we do see some contribution coming over the next few years across the number of different investing businesses that we have. But, and Craig just hit on it at the end, the real opportunity we see as we do long-term financial modeling is really in post-2026. You know, the area between 2026-28, as we continue to ramp up, that's where you're going to start to see a real inflection and much more material contribution to our P&L. Yep, thanks very much.

Speaker Change: Across the number of different invest in businesses that we have but and Craig just hit on the real opportunity. We see as we do long term financial modeling is really in that post 2026.

Speaker Change: Between 2026 28, as we continue to ramp Thats, where youre going to start to see a real inflection in much more material contribution to our P&L.

Speaker Change: Yes, thanks very much.

Speaker Change: Thank you.

Speaker Change: Our next.

Speaker Change: <unk> is coming from the line of Glenn Schorr with Evercore. Please proceed with your question.

Glenn Schorr: Our next question comes from the line of Glenn Schorr with Evercore. Please proceed with your question. Thank you.

Glenn Schorr: Thank you.

Craig Larson: So the question relates to the banks, and I see two-way activity. Right now, I see a little bit more banks coming back into the leveraged loan space, and you see some movement for them to get into providing some services in private credit. Yet at the same time, we know capital requirements are going up in the private credit world, and more asset-backed opportunities are coming your way. So I just wonder if you could talk a little bit about that dynamic and what specifically you're doing on the asset-backed side to position yourself for what we all think is a lot of growth. So Glenn, why don't I start?

Glenn Schorr: So question is that relates to the banks and I see two way activity I see right now I see a little bit more banks coming back into the leverage loan space and you see some <unk>.

Glenn Schorr: Movement in them getting into providing some services and private credit yet at the same time, we know capital requirements are going up.

Glenn Schorr: Private credit World and more asset back opportunities are coming your way. So I was just wondering if you could talk a little bit about that dynamic and what specifically you're doing on the asset back side to position for what we all think is a lot of growth ahead.

Speaker Change: So Glenn why don't I start.

Craig Larson: And thanks for asking, because these are really important secular drivers, really, as it relates to both businesses. So, as a reminder, as of year-end, we had around $90 billion of private credit AUM. Almost $50 of that was in asset-based finance and $38 billion in direct lending.

Glenn Schorr: And thanks for asking because these are these are really important secular drivers really as it relates to both businesses.

Glenn Schorr: As a reminder, as of as of yearend, we had around $90 billion of private credit AUM. Almost 50 of that was an asset based finance and 38 billion indirect lending. So these are big businesses for us.

Craig Larson: So, these are big businesses for us, I think probably larger than someone might expect in the framework of KKR. And you touched on two things, I think, first, as it relates to direct lending and overall activity. You know, we are seeing a lot more activity in the leveraged loan and the high-yield market, and CLO issuance feels like it's picking up. We actually look at all of that as really good for our businesses, and as it relates, a lot of that has been refinancing-related. So, there have been fewer new dollars in, but as it relates to new deals, we think that's going to be helpful for mid-market M&A. And if the private credit markets end up having a lower market share but a bigger pie, we think that dynamic is one that can still work really well in the framework of our firm. And in terms of private credit, I think there are lots of advantages that are going to lead to people just continuing to use that market. The point about ABF is a really, really important one, and it relates to the dynamics that you're talking about.

Glenn Schorr: Think probably larger than someone might expect.

Glenn Schorr: In the framework of KKR and you touched on two things I think first as it relates to direct lending in overall activity.

Glenn Schorr: We are seeing a lot more activity in the leveraged loan and high yield market and CLO issuance feels like its picking up we would actually look at all of that is really good for our businesses.

Glenn Schorr: And as it relates to a lot of that has been refinancing related so it's been less new dollars in.

Glenn Schorr: But as it relates to new deals, we think thats going to be helpful for mid market M&A and if the private credit markets end up having a lower market share but of a bigger pie. We think that dynamic is one that can still work really well.

Glenn Schorr: In the framework of our firm and in terms of private credit I think there are lots of advantages that are going to lead to people just continue to use that market. The point on ABF is it really really.

Glenn Schorr: Important one and it relates to the dynamics that you are talking about so I think as as banks pull back from many types of lending.

Craig Larson: So, I think as banks pull back from many types of lending and divest non-core loan portfolios, our opportunities, which we think are just going to continue to expand, have actually seen this in recent announcements from us. So, two weeks ago, we announced an accounts receivable financing for a barbecue business. I remember you actually sent me an email about this, as I know you were hoping that it could lead to nice little trinkets at our next Investor Day. In December, we announced a partnership with BMO focused on a $7 billion portfolio of RV loans. In October, Goldman announced the sale of its Green Sky platform to a handful of buyers, of which we were part. And in August and September, we announced the acquisition of a portfolio of prime auto loans from a regional bank in the southeast.

Glenn Schorr: And divest noncore loan portfolios our opportunity set we think is just going to continue to expand and you've actually seen this in recent announcements from us so two weeks ago.

Glenn Schorr: We announced that accounts receivable financing.

Glenn Schorr: For a barbecue business I remember you actually send me an email on this.

Glenn Schorr: I know you were hoping that could lead to nice node shrink it's at our next Investor day.

Glenn Schorr: In December we announced the partnership with BMO focused on 7 billion portfolio of Rd loans.

Glenn Schorr: Silbert Goldman announced the sale of its green Sky platform to a handful of buyers of which we were part of that consortium.

Glenn Schorr: In August and September we announced the acquisition of a portfolio of Prime auto loans.

From a regional bank in the southeast So I think you're seeing lots of opportunities for firms like ours to participate in asset based finance in a way that you didn't see five years ago, and it's a really important tailwind as we think about the growth opportunities that we see ahead, yeah. The only thing I would add Glenn is.

Craig Larson: So, I think you're seeing lots of opportunities for firms like ours to participate in asset-based finance in a way that you didn't see five years ago, and it's a really important tailwind as we think about the growth and opportunities that we see ahead. The only thing I would add, Glenn, is that we see a lot written about the direct funding market, and rightly so. It's become a very large and important market. I think Craig's right about this.

Speaker Change: We see a lot written about the direct lending market rightly. So it's become a very large and important market I think Craig right.

Scott Charles Nuttall: Q&A Volumes have been down, but private credits had a larger share. The Bulletproof Executive 2013, So as the banks come back, our expectation is you'll see M&A volume pick up. The Bulletproof Executive 2013, This ABF business I don't think is that well understood yet; the planning market is probably roughly one and a half trillion. The ABF market is probably closer to $5 trillion. The Bulletproof Executive, 2013, and it is.

Speaker Change: <unk> had been down private credits had a larger share of a smaller amount of volume.

Speaker Change: And so as the banks come back our expectation that Youll see M&A volume pick up in those there'll be plenty for the private credit market to participate in this ABF business I don't think is that well understood yet.

Speaker Change: As the direct lending market is probably roughly one five trillion.

Speaker Change: The ABS market is probably closer to five trillion on its way to seven.

Speaker Change: And it is in my view would be coming in asset class for institutional investors to understand a little bit like 10 12 years ago.

Bill Katz: In my view, private equity is becoming an asset class for institutional investors to understand a little bit like 10-12 years ago. We're very new concepts for most investors. We're having more dialogue on asset-based finance. We have 20 or so origination platforms around asset-based finance so far. I would guess in April, when we're together for investor day, we'll go deeper. Thanks, looking forward to the barbeque. Thanks Glenn, www.globalonenessproject.org. Our next question is from the line of Bill Katz with T.D. Cowan

Speaker Change: Infrastructure and direct lending, we're very new concepts for most investors were having more dialogue on asset based finance seeing more investors start to create an allocation or sub allocation on private credit. It's obviously incredibly synergistic with what we're building a global Atlantic and we are seeing interest from third party insurers as well.

Speaker Change: And I do think there is a significant amount of growth ahead for that business, we have 20, or so origination platforms or on asset based finance, so far and I would expect that number to continue to go up.

Robert H. Lewin: Please proceed with your question. Thank you very much. Good morning, everybody. So maybe flip it over to the insurance platform and just sort of adjust for the solar gain in the quarter. How should we be thinking about the ROE for the platform, given sort of two parts, one, that now you have 100% of the platform, and two, if interest rates were to go lower, is there enough growth in the business to offset any kind of degradation in net spreads? Thank you. Hey, Bill. All great questions.

Speaker Change: I would guess in April when we're together for the Investor Day, we'll go deeper on that topic.

Speaker Change: Thanks look forward to the barbecue.

Speaker Change: Thanks Glenn.

Robert H. Lewin: Thank you. The first thing is we look at Q4 and we look at 2023, a very strong performance from the global Atlantic business. The management team has done a great job, and it's a big reason why we're excited to own 100% of the business. You are right that in Q4, as well as through 2023, that the P&L did have some tailwinds, some variable investment income on a gross basis of $35 million in Q4. At the beginning of the year, we had about, you know, 20% of our book on a net basis exposed to floating rates. The team did a good job making that adjustment and still got the benefit of rising rates through much of 2023. We ended the year at about 16%.

Speaker Change: Our next question is from the line of Bill Katz with TD Cowen. Please proceed with you okay.

Bill Katz: Thank you very much good morning, everybody, so maybe flip it over to the insurance platform and just sort of adjusting for the solar gain in the quarter, how we should be thinking about the ROE for the platform.

Bill Katz: Given sort of two parts, one and now you have 100% of the platform and two if interest rates were to go lower is there enough growth in the business to offset any kind of degradation in net spreads. Thank you.

Robert H. Lewin: And so as we think about interest rates going down in 2024, we're conscious of that. In Q4, too, specifically, we made a modest adjustment to our comp. So effectively had over-accrued a little bit through the course of Q1, Q2, Q3, Q4, Q5, Q6, Q7, Q8, Q9, Q10, Q11, Q12, Q13, Q14, Q15, Q16, Q17, Q18, Q19, Q19, Q20, Q21, Q22, Q23, Q24, Q25, Q26, Q27, Q28, Q28, Q29, Q29, Q30, Q31, Q32, Q33, Q34, Q34, Q35, Q36, Q37, Q38, Q39, Q40, Q42, Q42, Q43.

Speaker Change: Yeah, Hey, Bill all great questions. Thank you.

Speaker Change: First thing is we look at Q4, and we look at 2023, a very strong performance from the global Atlantic.

Speaker Change: This management team has done a great job and it's a big reason why we're excited to own 100% of the business.

Speaker Change: Alright that in Q4 as well as through 2023 that the P&L did have some tailwind.

Speaker Change: Some variable investment income on a gross basis about $35 million in Q4.

Speaker Change: At the beginning of the year, we had about 20% of our book on a net basis exposed to floating rate team did a good job, making that adjustment and so got the benefit of rising rates through March 23, we ended the year at about 16% and so as we think about interest rates going down in 2024, we're conscious of that.

Speaker Change: In Q4, two specifically, we made a modest adjustment to our comp.

Speaker Change: So effectively had over accrued a little bit through the course of Q1 Q2 and Q3, so all things that positively impacted the quarter and all things front of mind as it relates to how we plan for 2024. So as we look at Q4 not necessarily replicable in the near term, but as you said, we have so many levers to be able to grow the GAA free.

Robert H. Lewin: So all things that positively impacted the quarter and all things front of mind as it relates to how we plan for 2024. So as we look at Q4, not necessarily replicable in the near term, but as you said, we have so many levers to be able to grow the GA franchise that our expectation, even in a declining rate environment, is that GA is going to continue to perform. As it relates to ROE targets, we continue to think the right level to model the business is at 14 to 15% pre-tax ROE. The team has done a nice job being able to beat that and beat it by a healthy margin over the past couple of years. But we are going into an environment here that could have lower interest rates and put a little bit of pressure on the P&L. Thank you. Thank you. Thank you. Our next question is from the line of Brian McKenna with Citizens JMP. Thanks. Good morning, everyone.

Speaker Change: <unk> that our expectation even in a reducing rate environment is that Jay is going to continue to perform as it relates to ROE targets. We continue to think the right level to model. The business is at that 14% to 15% pre tax ROE. The team has done a nice job being able to beat that and beat that by a healthy margin.

Speaker Change: Over the past couple of years.

Speaker Change: We are going into an environment here that could be lower interest rates and put a little bit of pressure on the P&L.

Speaker Change: Okay.

Speaker Change: Thank you. Thank you.

Speaker Change: Thank you. Our next question is from the line of Ryan Mckenna with citizens JMP. Please proceed with your question.

Devin Ryan: Thanks, Good morning, everyone. So just a question on the capital markets business I'm curious how did activity trend throughout the fourth quarter I'm, assuming November and December were better minds, just as broader market's rallied quite a bit into year end and then has this momentum carried into the new year and I'm just trying to get a sense of the jumping off point for capital markets activity levels.

Robert H. Lewin: So just a question on the capital markets business. I'm curious, how did activity trend throughout the fourth quarter? I assume November and December were better months, just as broader markets rallied quite a bit into year end. And then has this momentum carried into the new year? And I'm just trying to get a sense of the jumping-off point for capital markets activity levels to start. Yeah, great.

Speaker Change: To start 2024, yeah, great. Thanks.

Robert H. Lewin: Thanks for the question. Obviously, we were really pleased with the performance of our capital markets business in Q4. And really, for all of 2023, you look at Q4 specifically, a great quarter, did benefit maybe from a bit of deferral of some fees that could have been in Q3 that ended up in Q4. You're right, as the markets picked up in November and December, that definitely helped as well. But I think the more important point about our capital markets business, really, if you look at 2022 and 2023, through much of both of those years, debt capital markets and equity capital markets were largely shut, and our business still was able to generate on average close to $600 million of annual revenue in both of those years.

Speaker Change: Thanks for the question, obviously, we're really pleased with.

Speaker Change: <unk> of our capital markets business in Q4.

Speaker Change: And really for all of 2023, you look at Q4, specifically great quarter.

Speaker Change: It may be from a bit of of deferral of some fees that could have been in Q3.

Speaker Change: I ended up in Q4, you're right as the markets picked up in November December that definitely helped as well, but I think the more important point on our capital markets business really if you look at 2022 and 2023 through much of both of those years debt capital markets equity capital markets were largely shot.

Speaker Change: And our business still was able to generate on average close to $600 million of annual revenue and both of those years. So we're quite proud of the resilience of the business model. The durability of the business model. So it wasn't that long ago, and very healthy market environments, our capital markets business was generating roughly $400 million a year.

Robert H. Lewin: So we're quite proud of the resilience of the business model, the durability of the business model. So it wasn't that long ago, in very healthy market environments, our capital markets business was generating roughly $400 million a year. And as you also point out, you know, we've got a business that can generate really outsized outcomes when the markets come back. It wasn't that long ago, 2021, when our capital markets business in very healthy markets generated $840 million in revenue. Now, despite the strong Q4, we're not back to those healthy levels of capital markets. Deployments are still, you know, relatively muted across the space.

Speaker Change: And as you also pointed out we've got a business that can generate really outsized outcomes when the markets come back.

Speaker Change: Isn't that long ago, 2021, where our capital markets business and very healthy markets generated $840 million of revenue now. Despite the strong Q4, we're not back to those healthy levels of capital markets deployment is still relatively muted across the space leveraged finance market feels better but the CLO market is.

Robert H. Lewin: The leverage finance market feels better, but the CLO market is continuing to get healthy. The IPO market, and secondary markets, you know, they continue to trend in an upward way, but not back anywhere close to where we were in 2021. Now, as we think about pipelines going into 2024, we're quite constructive.

Speaker Change: Continuing to get healthy IPO market secondary markets.

Speaker Change: They continue.

Speaker Change: Yes.

Speaker Change: The trend in an upward.

Speaker Change: Way, but not back anywhere close to where we were in 2000.

Speaker Change: 'twenty one.

Speaker Change: Now.

Speaker Change: As we think about pipelines going into 2024, we're quite constructive.

Robert H. Lewin: As relates to Q1, you know, still very early in the quarter to give you a read. But our pipelines, as we're going into the year just across the firm from deployment, the engagement we're having with our third-party clients, we're expecting a constructive 2024. Thanks, Ralph.

Speaker Change: As it relates to Q1.

Speaker Change: It's still very early in the quarter to give you a read but our pipelines as we're going into the year just across the firm from deployment. The engagement, we're having with our third party clients, we're expecting a constructive 2024.

Speaker Change: Great. Thanks, Rob.

Speaker Change: Our next question is from the line of Finian O'shea with Wells Fargo Securities. Please proceed with your question.

Craig Larson: Our next question is from the line of Finney & O'Shea with Wells Fargo Securities. Please proceed with your question. Hey everyone, good morning.

Finian O'shea: Hey, everyone. Good morning.

Craig Larson: Going back to ABF, a lot of color you provided there; recently, in a presentation, you outlined the ABF origination growth in recent years. I would like to see if you can touch on the potential for improvement into 2024 and then what that could mean for the credit fee rate and potentially the capital markets opportunity. Thank you. If it is Craig, why don't I start there?

Finian O'shea: Going back to ABS, a lot of color you provided there.

Finian O'shea: Recently in a presentation you outlined the ABF origination growth in recent years seeing if you can touch on the potential for <unk>.

Finian O'shea: Improvement into 2024, and then what that can mean for the.

Finian O'shea: Credit fee rate and potentially the capital markets opportunity. Thank you.

Speaker Change: Thank you finished Greg why don't I start there.

Craig Larson: So we noted in that presentation that if you look from 2018 to 2020, so before the GA acquisition, average annual asset origination was in that $9 billion a year, and if you look post-acquisition, we've averaged $25 billion. Now that is not just ABF, that includes direct lending, that includes mortgage loans, etc. And we also have, so I think as we look at how we're positioned for growth and activity from here, we think the opportunity for that is one that's going to be able to expand as it relates from an ABF standpoint, both the insurance relationships that we have, in addition to the capital that we have that's more opportunistic in nature. So I think, again, that outlook for us is one, as we've continued The only thing I would add, Finn, is that... You're right to ask about the KCM operation. Reminder, when we spoke at the end of November... We talked about all the different positive opportunities we had to unlock more value with GA, including across... Thank you, Beth.

Finian O'shea: So we'd noted in that in that presentation that if you look 2018 to 2020, so before the <unk>.

Finian O'shea: Acquisition.

Finian O'shea: Average annual asset origination was in that $9 billion, a year and if you look post acquisition, we've averaged $25 billion now that is not just a.

Finian O'shea: ABS that includes direct lending that include excludes mortgage loans et cetera.

Finian O'shea: And we also have.

Finian O'shea: So I think as we as we look how we're positioned in growth in activity from here, we think the opportunity for that.

Finian O'shea: As one that's going to be able to expand as it relates from an avs standpoint, both the insurance relationships that we have.

Finian O'shea: In addition to the capital that we have it's more opportunistic in nature.

Finian O'shea: I think again that outlook for US is one as we've continued to grow and expand that we're very positive on and think it would be a real growth engine within the credit business broadly.

Speaker Change: Yes, the only thing I would add is that.

Speaker Change: You're right to ask you about the <unk> opportunity as a reminder, when we spoke at the end of November.

Speaker Change: Just about all of the different positive.

Speaker Change: Opportunities, we have to unlock more value with GAA, including across the rest of the firm from an investing standpoint, creating new product.

Scott Charles Nuttall: The Bulletproof Executive 2013, Private Wealth Distribution, Ivey, which is our third-party fund strategy, and then www.thevenusproject.com. And we do think that that can be quite meaningful for us. So think of it as, in effect, using the model we've already built with KCM, but more across this ABF platform. We really haven't gotten to that yet when we had 37%...

Speaker Change: Private wealth distribution, IV, which is our third party fund strategy and then.

Speaker Change: Global in particular Asia, and as part of that list, we did talk about the capital markets opportunity.

Speaker Change: And we do think that that can be quite meaningful for us.

Speaker Change: So think of it as in effect using the model, we've already built with KCB M, but more across this ABS platform, we really haven't gotten to that yet.

Speaker Change: And when we had 37%.

Patrick Davitt: Ownership from third parties, it was a little bit more challenging to get after that. We think over time that could be a significant opportunity, call it, you know, in the hundreds of millions of dollars if we can get that right. It's going to take time, we'll keep you posted on it, but we do think that is the next big leg of growth. Structured Finance, Structured Credit, Asset-Based Finance. Our next question is from the line of Patrick Davitt with Autonomous Research. Please proceed with your question. Hey, good morning, everyone.

Speaker Change: Ownership from third parties it was a little bit more challenged to get after that we think over time that could be a significant opportunity call. It in the hundreds of millions of dollars. If we can get that right, it's going to take time.

Speaker Change: We will keep you posted on it but we do think that as the next big leg of growth.

Speaker Change: Cross sell things structured finance structured credit asset based finance for Acacia.

Speaker Change: Yeah.

Speaker Change: Our next question is from the line of Patrick Davitt with Autonomous Research. Please proceed with your question.

Patrick Davitt: Hey, good morning, everyone questions on margin the FRE margin came in much better than consensus. So firstly is that mostly a function of the much better capital markets results and secondly, if so if this continues into 2024 as you suggest should we expect a similar incremental positive.

Craig Larson: Questions on margin, the FRE margin came in much better than consensus. So firstly, is that mostly a function of the much better capital markets results? And secondly, if so, if this continues into 2024, as you suggest, should we expect a similar incremental positive operating leverage impact as that light item recovers? Hey, Patrick, for quite some time, and we've got it, we feel like we've got a business model that could operate in the low 60s from an FRE margin perspective, which drove the FRE margin beat in the quarters combination. A few things, healthy management, 1st quarter for us and then also some operating expense leverage as well.

Patrick Davitt: Operating leverage impact as that line item recovers. Thank you.

Speaker Change: Hey, Patrick.

Patrick Davitt: For quite some time and we've guided that we feel like we've got a business model that could operate in the low sixty's from an FRE margin perspective, which drove.

Speaker Change: <unk> already margin beat in the quarter as combination of few things healthy management fee growth clearly very strong capital markets.

Speaker Change: Quarter for US and then also some operating expense leverage as well as we move into 2024 with our already announced shift in how we're.

Robert H. Lewin: As we move into 2024 with our already announced shift in how we're going to form our compensation pool at KKR and reduce the compensation load against our fee-related revenue, you know, our expectation is going forward we're going to be sustainably able to operate in the mid-60% FRE margin. The zip code is affirmed. And I think I said on this last call or the call before that I don't think that the mid-60% level is a cap for us given the business model that we're employing. You know, we're trying to scale things that we've already started here, and if we're right about our ability to execute on that, we're going to be able to drive revenue growth, fee revenue growth, at a level that's well in excess of expense growth over the next several years.

Speaker Change: Going to form our compensation pool at KKR, and reducing the compensation load against.

Speaker Change: Our fee our fee related revenue our expectation is going forward, we're going to be sustainably able to operate in the mid 60% FRE margin ZIP code as a firm and I think I said this last call or the call before I don't think that mid 60% level is a cap for us given the business model that we're employing.

Speaker Change: We're trying to scale things that we've already started here and if we're right and our ability to execute on that we're going to be able to drive revenue growth fee revenue growth at a level thats well in excess of expense growth over the next several years. So I do think we should be able to absent a really draconian type of market environment operated.

Robert H. Lewin: So I do think we should be able to, you know, abstain a really draconian type of market environment, operate at that mid 60% FRE margin, quarter in, quarter out, with the potential to be able to drive that up over time, assuming we're able to execute as a management team like we think we can. Thank you. Our next question is from the line of Stephen Chuback with Wolf Research. Hey, good morning

Speaker Change: That mid 60% FRE margin quarter in quarter out with the potential to be able to drive that up over time, assuming we're able to execute as a management team like we think we can.

Speaker Change: Our next question is from the line of Steven <unk> with Wolfe Research. Please proceed with your question.

Steven: Hey, good morning.

Craig Larson: So, a two-parter for me just on the PE fundraising outlook. The closings for the second next-gen tech fund, and the third global impact fund certainly encourage meaningful step-ups versus the prior vintages. Does that momentum increase or inform your confidence for the upcoming PE flagship fundraise? Or are these simply too niche and sector-specific to offer any sort of read-across? And when do you expect to go to market with the funds, given the significant amount of deployment capacity that you still have to pay for? It's Craig. Why don't I start?

Steven: So a two parter for me just on the P fund raising outlook the closings for the second next Gen Tech fund the third global impact funds, certainly encouraging meaningful step ups versus the prior vintages does that momentum increase or inform your confidence for the upcoming P flagship fund raise or the simply too.

Steven: Two niche and sector specific to offer any sort of read across and when do you expect to go to market with the funds given the significant amount of deployment capacity that you still have to work through.

Craig Larson: Look, I think, again, as it relates to deployment capacity, the numbers are going to be understated given the platforms or platform investments we've made, etc. So I don't think the dynamic is one as it relates to deployment. I think, in particular, as we look at our pipelines, which are building, and actually expect across the industry to see deployment increase in 24 as it relates to 23. And I think, as it relates to your first question in terms of overall tone, look, I think, as a starting point, we've seen a nice increase in public markets. We've seen broad markets improve since mid-October, to say the least. High-yield indices are up, and LSTA's up.

Steven: Okay.

Steven: Hey, it's Craig why don't I start and look I think again as it relates to the deployment capacity.

Craig: The numbers are going to be understated given platforms or platform investments, we've made et cetera. So I don't think the dynamic is one is as it relates to deployment I think in particular as we look at our.

Craig: Our pipelines, which are building and actually expect across the industry to see deployment.

Craig: The increase in 24 as it relates to 'twenty, three and I think as it relates to your.

Craig: As it relates to your first your first question in terms of overall tone.

Craig: I think as a starting point, we've seen a nice increase in public markets.

Craig: We've seen broad markets improve since mid October to say the least.

Craig: <unk> is up.

Craig Larson: And I think, in addition to that, we've also seen an increase in the capital markets. And so, given that backdrop as it relates to fundraising and tone, I think, if anything, it feels like clients are more front-footed. And again, it's tough to draw broad conclusions from one month of activity, and we'll see how things continue to play out from here. But given our track records, the performance that we've had, in particular, in a business for us, like America's private equity over a long, long period of time, I think we feel very good about the opportunities that we see as we embark upon fundraising for that strategy. Thank you, Stephen and Scott. To your question about read-across, I don't think it's a stretch to say that, you know, it doesn't form, The Bulletproof Executive 2013 http://www.kenhub.com. And what we've seen is that investors are re-upping, and they've seen, Also, the color from the dialogue we're having is... Even more mature programs out there understand these are going to be very good vintage years, www.thevenusproject.com The Bulletproof Executive 2013, but I don't think there's an understanding of that in the market. And that's on the more mature programs, which I would say the minority, that we've talked to as you think about.

Craig: And I think in addition to that we've also in the increase in the capital markets and so I think given that backdrop as it relates to fundraising and tone I think like if anything on balance. It feels like clients are more are more front footed and again, it's tough to draw broad conclusions from one month of activity and we'll see how things continue to play out from here, but.

Craig: Given our track records.

Craig: The performance that we've had in particular in our business for us.

Like Americas private equity over a long long period of time I think we feel very good about the opportunities that we see as we embark upon fund raising for that strategy Hey, Steven It's Scott to your question about read across I don't think its a stretch to say that it does inform our broader perspective.

Speaker Change: Funds that you mentioned were raised at a period of time, where the capital markets are nearly as robust.

Speaker Change: And what we've seen is that in.

Scott Charles Nuttall: Investors are re upping the funds, where they've seen strong performance.

Scott Charles Nuttall: Also the color from the dialogue, we're having as I think.

Scott Charles Nuttall: Even more mature programs out there understand these are going to be very good vintage years, and don't want to Miss out I think in the past if you go back to the financial crisis. There are some institutions that pulled back.

Scott Charles Nuttall: Then had regret.

Scott Charles Nuttall: I think there is an understanding of that in the market and that's on the more mature programs, which I would say the minority of the people that we've talked to you as you think about it.

Scott Charles Nuttall: The industry has expanded across. Sovereign Wealth Funds, Insurance Companies, Family offices, obviously, we talked about private wealth. We're, we're optimistic, but, in part, based on those discussions and in large part based on the great work our team has been doing in terms of keeping the investment performance, That's great, Colorado. Thanks for taking the time.

Scott Charles Nuttall: How the industry has expanded across sovereign wealth funds insurance companies family Office is obviously, we talked about the private wealth channel.

Speaker Change: We're optimistic.

Speaker Change: Some part based on those discussions in large part based on the great work. Our team has been doing in terms of keeping the investment performance very strong.

Speaker Change: That's great color. Thanks for taking my question. Thank you.

Speaker Change: Our next question is from the line of Brian Bedell with Deutsche Bank. Please proceed with your question.

Brian Bedell: Our next question is from the line of Brian Bedell with Deutsche Bank. www.youtube.com Great, thanks. Good morning, folks. Thanks for taking my question. Also, maybe just to focus back on capital markets and maybe take a longer-term view. So if you think about it from more of a structural basis in terms of, you know, your current dry powder, but also the deployment pipeline over the next few years from your flagship fundraising cycle, and then you mentioned the ABF opportunity as well over the long term. So as we think about that and build out to 2026, not to put a number on it, but is it fair to assume you could easily be well over a billion in capital markets fees by then, even without a particularly robust capital markets environment? And, you know, in terms of your 450 per share plus target, should we be thinking of, you know, maybe a more robust environment as you're driving the plus in that equation, as opposed to the Hi Brian, It's Rob.

Brian Bedell: Great. Thanks, Good morning folks. Thanks for taking my question I'll Sue maybe just to focus back on capital markets and maybe more of a longer term view.

Brian Bedell: So if you think about it from more of a structural basis in terms of.

Brian Bedell: Your current dry powder, but also.

Brian Bedell: Appointment pipeline over the next few years from your flagship fundraising cycle.

Brian Bedell: Sure.

Brian Bedell: The ABF opportunity as well over the long term.

Brian Bedell: We think about that and building out to 2026.

Brian Bedell: Not to put a number on it but is it fair to assume you could easily be well over $1 billion in capital markets fees.

Brian Bedell: By then even without a particularly robust capital markets environment and you are in terms of your $4 50.

Speaker Change: For sure.

Speaker Change: Plus target should we be thinking of maybe a more robust environment.

Speaker Change: Driving the costs in that in that equation as opposed to the baseline important.

Speaker Change: Yes, hi.

Speaker Change: Hi, Brian.

Speaker Change: So it's Rob I'll start out.

Robert H. Lewin: I'll start off. We really like our business model and our approach to the market with our capital markets business and think it's a big reason why there's a lot of upside. The way we face the market really is with one team that represents our private credit pools at Capa, where we're one of the largest providers in the world, and our capital markets expertise. It's that same team when it's facing a client that can walk across our liquid credit business, which is one of the biggest liquid credit businesses in the world. And so we combine three very large aspects of our business, and we think that's a real benefit to our clients. And there are not a lot of firms out there that can match what we do from a coordination perspective.

Rob: We really like our business model and our approach to market with our capital markets business and think that's a big reason.

Rob: Why there is a lot of upside in the way we face the market really is with one team.

Rob: That represents our private credit flows of capital wherever the one of the largest providers in the world our capital markets expertise. It's that same team when they are facing clients that can work across our liquid credit business, which is one of the biggest liquid credit businesses in the world and so we combine three very large aspects of our business and we think thats a real benefit.

Rob: To our clients so theres not a lot of firms out there that can match, what we do.

Rob: From a coordination perspective.

Robert H. Lewin: I like our ability to compete for talent in the capital market space. We've been able to recruit and retain, over the past number of years, some really talented people at what they do, and especially as we've expanded in product and geography, that's a big part of our story, and I can see more of that. You mentioned, you know, what types of upside we have.

Rob: I like our ability to go compete for talent and the capital market space.

Rob: We've been able to recruit and retain over the past number of years really.

Rob: Talented people at what they do and especially as we've expanded in product and geography, that's a big part of our story and I can see more of that.

Rob: You referenced.

Rob: What types of upside we have I think if you look back to 2021 of course, we had a buoyant capital markets at a time, but KKR does a lot more as affirmed today, both from a product perspective deployment perspective, and geographically than we did that we think we're going to continue to be able to take share with third party clients and Scott just touched on.

Robert H. Lewin: I think if you look back to 2021, of course, we had a buoyant capital markets at the time. But KKR does a lot more as a firm today, both from a product perspective, deployment perspective, and geographically than we did then. We think we're going to continue to be able to take share with third-party clients, and Scott just touched on the opportunity to coordinate with Global Atlantic and the opportunity that that could create on the ABF side. And so no specific numbers, excuse me, on the ABF side of KCM; no specific numbers, of course, as it relates to 2026.

Rob: On the opportunity to coordinate.

Rob: With global Atlantic and the opportunity that that can create on the ABS side and so no specific numbers excuse me on the ABS side of case, yes, those specific numbers of course as it relates to 2026, but we think this is a growth oriented business and we think in a really good capital markets environment, we're going to be able to grow off of that $840 million revenue number.

Scott Charles Nuttall: But we think it's a growth-oriented business, and we think in a really good capital markets environment, we're going to be able to grow off of that 840 million revenue number that we put up in 2021. Hey Brian and Scott, I think we'll go deeper on this in April when we're together. But the way we think about it, if you look back five years, it's really not very representative of what KCM is today or where it's going to be. www.

Rob: <unk> that we put up in 2020.

Rob: Hey, Brian It's Scott look I think we'll go deeper on this in April when we're together.

Scott Charles Nuttall: The way, we think about it as you look back five years, it's really not very representative of what <unk> is today and where it's going to be.

Speaker Change: Your point, so we've been globalizing the business across more of what <unk> is doing around the world.

Scott Charles Nuttall: KKR-LP.com The Bulletproof Executive 2013, For example, if you go back several years, infrastructure wasn't a very big part of it. Now it's very important, and that informs our perspective on the ABF opportunity. I can't believe the real estate opportunity. And then on top of that, our portfolios. So there's more.

Speaker Change: We have been penetrating more of our own strategies and efforts. So for example, if you go back several years infrastructure wasn't a very big part of the capital markets business now its a very large part of that business.

Speaker Change: That informs our perspective on the ABF opportunity.

Speaker Change: The real estate opportunity overtime.

Speaker Change: And then on top of that our portfolio is larger.

Speaker Change: Theres more refinancings, there's more exits to do in the public markets.

Scott Charles Nuttall: More Exits to do in the public market. And as our deployment goes up, in our experience, in our dry powder, so does our capital..., https://www.patreon.com NEMIC Capital Market Overall will continue to increase, And I think we will see that in the future as we execute on all of those. That's helpful, thank you. Our next question is from the line of Benjamin Budish with Barclays. Pleased to see you.

Speaker Change: And as our deployment goes up and our experience and our dry powder goes up so to our capital markets opportunities.

Speaker Change: Because we can speak for larger transactions, we need to bring partners alongside Theres just more for us to do so all of that speaks to the growth opportunity, which is why I think youre seeing this baseline even in a pretty anemic capital market overall continue to increase and I think youll continue to see that into the future as we execute on all of those fronts.

Speaker Change: That's helpful. Thank you.

Robert H. Lewin: Thanks for taking the question. I just wanted to check, I think you didn't mention in the prepared remarks, but can you share any color on your line of sight towards realization and related revenues into Q1? It sounds like on the capital markets side, things are looking pretty strong, but just wondering on the realization side, anything you can share to date? Hey, Ben.

Speaker Change: Hugh.

Our next question is from the line of Benjamin finish with Barclays. Please proceed with your question.

Benjamin: Hi, good morning, Thanks for taking the question I just wanted to check I think you Didnt mentioned in the prepared remarks, but can you share any color on your line of sight towards realization and related revenues into Q1, it sounds like on the capital market side things are looking pretty strong, but just wondering on the realization side any anything you can share to date. Thank you.

Speaker Change: Hey, Matt.

Robert H. Lewin: We have a pretty healthy pipeline as we're coming into 2024, from a monetization perspective. But what I'd say is timing is a little bit less certain given some regulatory approvals that are required around some of these monetizations. But taken together, we have, you know, somewhere around $500 million of very high visibility monetization-related revenue. But we currently don't expect all that to hit in Q1. Obviously, there are still a couple of months to go in the quarter as well.

Speaker Change: We have a pretty healthy pipeline as we're coming into 2024.

Speaker Change: A monetization perspective, but what I'd say is timing is a little bit less certain given some regulatory approvals that are required around some of these monetization, but taken together, we have somewhere around $500 million very high visibility monetization related revenue, but we currently don't expect all of that to hit in Q1, obviously is still a couple of months to go in.

Speaker Change: The quarter as well and as usual at the end of Q1, we will provide our stand your press release that gives you more detail around the monetization related revenue for the quarter.

Robert H. Lewin: And as usual, at the end of Q1, we'll provide our standard press release that gives you more detail around the monetization-related revenue for the quarter. You know, maybe while we're on the topic of monetization, there is one other thing that I think is worth calling out, given the growth across, you know, a number of our businesses and also the strategic announcements that we made in November, including moving our comp down on fees and up on carry. This is just a much smaller part of our business than it used to be at KKR. It's part of the reason why you'll see us introduce this new metric, Total Operating Earnings, in Q1. Our expectation going forward is that north of 70% of our earnings is going to come from Total Operating Earnings. So, of course, monetization-related revenue is going to be a big part of where we go as a firm. It's just a lot smaller on a relative basis than it used to be. I got it.

Speaker Change: Maybe while we're on the topic of monetization one other thing that I think is worth calling out given the growth across a number of our businesses and also the strategic announcements that we made in November including moving our comp down on fees and up on Carey.

Speaker Change: This is just a much smaller part of our business than it used to be a KKR as part of the reason why you'll see us introduce this new metric in Q1 total operating earnings our expectation going forward is north of 70% of our earnings is going to come from total operating earnings. So of course monetization related revenue is going to be a big part of.

Speaker Change: Where we're going as a firm is just a lot smaller on a relative basis than it used to be.

Robert H. Lewin: Very helpful. Thanks, Rob. Next question is from the line of Mike Brown with KVW. Thank you.

Speaker Change: Got it very helpful. Thanks Robyn.

Thanks.

Speaker Change: Next question is from the line of Mike Brown with <unk>. Please proceed with your question.

Craig Larson: Great. I just wanted to ask about the infrastructure. So, strong performance there in the quarter. Can you maybe just expand on some of the key drivers behind that 5% performance in the quarter? And then, if we look forward, how do you expect investor demand for this asset class to evolve? And as allocations grow, where are the dollars kind of shifting from? And then specifically on the Asia side, what's kind of making the strategy there so attractive to LPs? If you can maybe just touch on some of the deployment. Why don't I begin?

Michael Carrier: Great I wanted to ask on infrastructure. So strong performance there in the in the quarter can you maybe just expand on some of the key drivers behind that 5% performance in the quarter and then if we look forward. How do you expect investor demand for this asset class to evolve and as allocations grow where the dollar is kind of.

Michael Carrier: Shifting from and then specifically on the Asia side, whats kind of making the strategy, they're so attractive to L. P. As if you could maybe just touch on some of the deployment opportunities.

Craig Larson: Mike, thanks for the question. Why don't I begin first, just as it relates to the overall framework of the infrastructure platform? Because you're right, we've seen wonderful growth. So if we look back three years ago, AUM was $17 billion, and at 1231, we were at about $60 billion.

Speaker Change: Why don't I begin and Mike. Thanks for the question why don't I begin first just as it relates to the overall framework of the infrastructure platform, because you're right we've seen wonderful growth. So.

Speaker Change: If we look back three years ago, <unk> was $17 billion.

Speaker Change: And at 12 31 weird about 60, so we've gone from $17 billion to $60 billion.

Craig Larson: So we've gone from $17 billion to $60 billion, all organic. And that's as we are again, our infrastructure strategy is a front burner topic for us as it relates to fundraising. We're also fundraising for a climate strategy, and we also have the wealth products that we launched midway through last year that we expect to continue to build in scale. So I think the growth has been really attractive and there's a lot of momentum, but there's a lot more for us to do, which is exciting. I think as it relates to Asia, and why don't I touch on that for a moment, and it's again interesting to see the statistics there, because I think what you're seeing there reflects the growth as well as the diversification you're seeing across the platform. So at the end of 2019, we're looking at these stats over the weekend. We had about 21 billion AUM in Asia at the end of 21, we were up to 42, and at the end of 23, we were at 65.

Speaker Change: All organic.

Speaker Change: As we are.

Speaker Change: Again, our infrastructure strategy as a front burner topic for us as it relates to fundraising.

Speaker Change: We're also fundraising for our climate strategy.

Speaker Change: And we also have the wealth products that we've also launched midway through last year that we expect to continue to build and scale. So I think the growth.

Speaker Change: Has been really attractive in a lot of momentum, but there's a lot more for us to do which is exciting.

Speaker Change: I think as it relates to Asia.

Speaker Change: And why don't I touch on that for a moment and it's again interesting to see the statistics there because I think what youre seeing there is reflects the growth as well as the diversification you're seeing across the platform. So at the end of at the end of 2019, we're looking at these stats over the weekend.

Speaker Change: We had about 21 billion of AUM.

Speaker Change: In Asia at the end of 'twenty, one we are up to 42.

Speaker Change: And at the end of 'twenty three we're at 65.

Craig Larson: And so again, if you kind of step back, at the end of 2019, we had 21 billion in AUM; almost 90% of that was in private equity. At the end of 23, we're at 65 billion, and 51% of that is in private equity. So you've seen meaningful growth for us in the region, as well as meaningful diversification across the footprint. And I think just as it relates to broad investment performance, I think it's something that the team is really proud of, and we all love to see, obviously, because you've seen strong, consistent results. Across the flagships, in particular, we're seeking mid-teens, gross, and low-teens, net returns with a 4-6% target annualized yield. Infra 1 and 2 are mature funds with performance that exceeds those targets, and Infra 3 and 4 are both earlier in their value creation, but are tracking very nicely.

Speaker Change: So again, if you kind of step back at the end of 2019, we had 21 billion of AUM.

Speaker Change: 90% of that was in private equity at the end of 'twenty three we're at 65 billion and 51% of that is in private equity so you've seen meaningful growth for us in the region.

Speaker Change: As well as meaningful diversification across the footprint and I think just as it relates to broad investment performance I think it's something that the team is really proud of and we all love to see obviously, because <unk> seen strong consistent results.

Speaker Change: Across the flagships in particular.

Speaker Change: Seeking mid teens gross low teens net returns with a 4% to 6% target annualized yield.

Speaker Change: And for one into our mature funds with performance that exceeds those targets and then for three and four both earlier in their value creation, but are tracking very nicely I think most recent fund is actually ahead of one two and three when you look at the returns in that fund relative to when we made that first investment. So I think the team has been wonderfully disciplined as it relates to it.

Craig Larson: I think our most recent fund is actually ahead of 1, 2, and 3 when you look at the returns in that fund relative to when we made that first investment. So I think the team has been marvelously disciplined as it relates to the investments we've made. We talk a lot about thematic approaches, renewable energy, digital infrastructure, data centers, fiber networks, all great examples of large, critical, growing markets where we think we can bring differentiated resources to bear. So again, a lot of progress, but a lot of opportunity ahead for us at the same time. Hey Mike and Scott, just I think in terms of your question about performance in the quarter, it was broad based. There's nothing that we'd point out to you.

Speaker Change: Investments we've made.

Speaker Change: We talk a lot about thematic approaches.

Speaker Change: Renewables digital infrastructure data centers fiber networks, all great. Examples of large critical growing markets, where we think we can bring differentiated resources to bear so again, a lot of progress, but a lot of opportunity ahead for us at the same time.

Speaker Change: Scott just I think in terms of your question about performance in the quarter.

Speaker Change: Broad based there is nothing that we'd point you to specifically the portfolio has been assembled incredibly thoughtfully as Greg mentioned and is performing very nicely and as expected. The ahead of expectations can be here.

Scott Charles Nuttall: The Bulletproof Executive 2013, As for your question about investor demand, where it's shifting, I mean, for the most part, we've seen people creating allocations over the last several years. It hasn't really been a shift out of other parts of alternatives to some extent where we've seen alternative allocations increase is to be able to accommodate something that is mission critical and has an attractive yield. The way we do it is it has to have that contractual yield, and it is inflation protected, so it's also viewed as an inflation hedge. And I think as people have done the work on the space, you've started to see more and more dollars flow into it. So, largely speaking, and none of these comments are universal, but largely speaking, it's been an and as opposed to an or. And I think in Asia, Craig hit it.

Speaker Change: Just about investor demand, where it's shifting from.

Speaker Change: For the most part we've seen people, creating allocations to infrastructure over the last several years. It hasnt really been a shift out of other parts of alternatives to some extent, where we've seen alternative allocations increase is to be able to accommodate and infrastructure allocation and I think a lot of that as investors have.

Speaker Change: Focused on the fact, you've got.

Speaker Change: A real asset.

Speaker Change: That is mission critical.

Speaker Change: Is it attractive yields and the way we do it as you know it has to have that contractual yield than it is inflation protected. So it's also viewed as an inflation hedge.

Speaker Change: And I think as people have done the work on this space you've started to see more and more dollars flow into it.

Speaker Change: Largely speaking none of these comments of universal, but largely speaking it's been in and as opposed to anymore.

Speaker Change: And I think on Asia, Craig hit it.

Scott Charles Nuttall: I mean, our Asia Infra business has gone from a standing start to $10 billion in AUM in four years. We have a great team on the ground. They're leveraging our Pan-Asia presence across our nine offices. And as you know, we run the firm as one company, so everybody helps each other. I think that's really allowed us to scale very rapidly in that market. However, there's a significant amount of capital required. Thank you for joining us.

Speaker Change: And for our business has gone from a standing start to $10 billion of AUM in four years.

Speaker Change: We have a great team on the ground they are leveraging our Pan Asia presence across our nine offices and as you know we run the firm as one firm. So everybody helps each other I think that's really allowed us to scale very rapidly in that market is a significant amount of capital required to develop infrastructure all across Asia.

Craig Larson: And candidly, on the margin, there's less competition in Asia because fewer firms have built the platform. Drink Large Opportunity, Fewer Competitors, Firm Well-Informed. Thank you both for all the great color.

Speaker Change: In those themes that Craig just walked you through and candidly on the margin there is less competition in Asia, because fewer firms and build the platform that we've built.

Robert H. Lewin: The Bulletproof Executive 2013, Our next question is from the line of Michael Cyprys with Morgan Stanley. Great, thanks. Good morning.

Large opportunity fewer competitors firm well integrated.

Speaker Change: Thank you both for all the great color. Thank you.

Speaker Change: Our next question is from the line of Michael Cyprus with Morgan Stanley. Please proceed with your question.

Robert H. Lewin: I just wanted to ask about insurance. I was hoping you might be able to talk about the opportunity to expand organic insurance origination, how much you expect to do annually there, maybe talk about some of the opportunities around getting on more platforms, how meaningful that could be at this point, and if interest rates were to come down, what sort of impact that might have on customer demand and origination volumes. Maybe you could also speak to some of the pipelines for new blocks, which you guys have been quite busy with. Thanks for the question, Mike. Why don't I start?

Michael Carrier: Great. Thanks, Good morning, I just wanted to ask about insurance I was hoping you might be able to talk about the opportunity to expand the organic insurance origination how much do you expect it to do annually. There maybe talk about some of the opportunities around getting on more platforms, how meaningful could that be at this point and if interest rates were to come down.

Michael Carrier: What sort of impact might that have for <unk>.

Michael Carrier: Customer demand in origination volumes, maybe can also speak to some of the pipelines for new blocks, which you guys have been quite active with.

Speaker Change: Great. Thanks for the question, Michael why don't I start.

Speaker Change: So over the last few years, our individual business is done on average around $10 billion of production and Youre right <unk> seen a step up across the industry given.

Robert H. Lewin: So, over the last few years, our individual businesses have done, on average, around $10 billion in production. And you're right, you've seen a step up across the industry, given, I think, higher rates. But I don't think that tells the full story.

Speaker Change: I think higher rates, but I don't think that tells the full story I think what we're seeing is a real trend towards retirement products, it's probably somewhat agnostic to where interest rates are.

Robert H. Lewin: I think what we're seeing is a real trend towards retirement products, and it's probably somewhat agnostic to where interest rates are. And as we think about Global Atlantic and how we're situated specifically in the individual markets, I think there's a lot of share that we can continue to take there, getting ramped up on some new platforms, as you suggested. Also, historically, Global Atlantic hasn't been as active in the longer-duration fixed annuity market, the 7- to 10-year product. We think there are some market share gains that we can have there. And we do have an expectation that we can take the individual business over time from $10 billion of production to $15 to $20 billion of production. Then on the institutional side of our business, you know, there are three components to it.

Speaker Change: And as we think about global Atlantic and how we're situated specifically in the individual markets I think theres a lot of share that we can continue to take their getting wrapped up on some new platforms. As you suggested also historically global Atlantic hasn't been as active in the more longer duration fit.

Speaker Change: Fixed annuity market to seven to 10 year product. We think there is some market share gains that we can have there and we do have an expectation that we could take the individual business over time from 10 billion of production to $15 million to $20 million of production.

Speaker Change: On the institutional side of our business.

Speaker Change: There is three components of it it's not just the block business, where we've had a lot of success over the last couple of quarters clearly with Metlife closing.

Robert H. Lewin: It's not just the block business, where we've had a lot of success over the last couple of quarters, clearly, with MetLife closing in Q4, the Manulife block closing in the first half of the year, and a really strong pipeline of opportunity, both domestically and especially internationally. But there are a couple of other aspects of our institutional business that we're really excited about. We've become a real leader in flow reinsurance in the marketplace. Again, that's both domestic and international.

Speaker Change: Q4, the Manulife block closing in the first half of the year and a really strong pipeline of opportunity, both domestically and especially internationally, but theres a couple of other aspects of our institutional business that we're really excited about where kind of a real leader in flow reinsurance and.

Speaker Change: In the marketplace again, thats, both domestic and international and to date, we have very little market share in the pension risk transfer market.

Robert H. Lewin: And to date, we have very little market share in the pension risk transfer market, where we think the capabilities of our team will really resonate in that market as well. So it's an opportunity for us to take share in what is a large and growing end market. And so we will take it together.

Speaker Change: Where we think the capabilities of our team I will really resonate in that market as well. So it's an opportunity for us to take share in what is a large and growing end market and so if you take it together is what gives us the confidence that you would have heard in our November call really.

Robert H. Lewin: It's what gives us the confidence that you would have heard in our November call, really working as one firm to be able to accelerate the growth of the Global Atlantic Platform over the next several years. Now, an important part of that growth, and I referenced it in our prepared remarks, relates to our ability to also be able to access third-party capital. And so our IV funds and strategies are a big part of where we're going as an organization. We've got a lot of momentum there.

Speaker Change: Really working as one firm to be able to accelerate the growth of the global Atlantic platform over the next several years now an important part of that growth and I referenced it in our prepared remarks relates to our ability to also be able to access third party capital and so our Ivy funds and strategies.

Speaker Change: Big part of where we're going as an organization. We've got a lot of momentum there as I mentioned earlier, 75% of the capital required.

Robert H. Lewin: As I mentioned earlier, 75% of the capital required in the two block deals that we've got in flight right now, the MetLife one that just closed, and Manulife, is going to be funded by third parties, by outside investors. We think that combination of GA balance sheet capital and third-party investors is really what the optimal structure looks like, especially for the institutional side of our business going forward. Great, thank you. Our next question is a follow-up from the line of Bill Katz of TD Cowen. Great, thanks so much.

Speaker Change: The two block deals that we've got in flight right now the Metlife one that just closed in Manulife is going to be funded by third parties by outside investors and we think that combination of balance sheet capital and third party investors is really what the optimal structure looks like especially for the institutional side of our business going forward.

Great. Thank you.

Speaker Change: Our next question is a follow up from the line of Bill Katz with TD Cowen. Please proceed with your question.

Bill Katz: I just want to circle back to capital management for a moment. I certainly appreciate you just raised the dividend by 6%, but if I start doing the math and look out to $4.50 of earnings power, and Rob, to your point, that more and more your business is going to be more recurring in nature, and then just sort of think about the low single-digit type of dividend hikes that have been sort of the more recent past, your dividend payout ratio is going to drop pretty dramatically, and then the yield on the stock is How are you thinking about capital return? I know that was a big discussion point at the November update.

Bill Katz: Great. Thanks, So much just wanted to circle back to capital management for a moment. So I. Appreciate you just raised the dividend by 6%, but if I start doing the math and look out $4 50 of earnings power and Rob to your point that more and more of your business is going to be more recurring in nature, and then just sort of think about sort of low single digit type of dividend hikes, that's been sort of the <unk>.

Bill Katz: Our recent past your dividend payout ratio is going to drop pretty dramatically and then the yield on the stock is going to be relatively negligible. How are you thinking about capital return I know that was a big discussion point at the November update so rich man's issue I presume, but how do we think about maybe priorities from here capital return versus deploying.

Robert H. Lewin: It's a rich man's issue, I presume, but how do we think about maybe priorities from here, capital return versus strategic deployment? Sure. Thanks, Bill. So, why don't I start with dividend policy and then, I think, more importantly, talk about our overall approach to capital allocation, which is of equal importance. So on dividend policy, we really like our policy a lot. We started with a fixed dividend of $0.50 annually when we converted to a C Corp five years ago.

Bill Katz: And strategically.

Bill Katz: Sure.

Speaker Change: Thanks Bill.

Speaker Change: Why don't I start on the dividend policy and then just I think more importantly talk about our overall approach to capital allocation.

Speaker Change: As of equal importance, so our dividend policy, we really really like our policy, what we started with a fix.

Speaker Change: Fixed dividend of 50 cents annually when we converted to a C Corp, five years ago.

Robert H. Lewin: And every year, we have increased that dividend, and we believe we've got the visibility going forward to have consistent and stable growth in our dividend. And so we like our dividend policy. Now, a big reason why we have the dividend policy that we have is that we see so much opportunity to be able to invest back into KKR's business for growth. And you've heard us talk about our capital allocation policy for some time now in a very consistent way. And I don't think there's anything more important in a capital allocation policy than being consistent.

Speaker Change: And every year, we have increased that dividend and we believe we've got the visibility.

Speaker Change: Going forward to have consistent and stable growth to our dividend and so we like our dividend policy No Big reason why we have the dividend policy that we have is because we see so much opportunity to be able to invest back into K carrier business for growth and you've heard us talk about our capital allocation policy for some time.

Speaker Change: Consistent way and I don't think Theres anything more important from a capital allocation policy, then being consistent in our approach is to optimize for recurring and growth oriented.

Robert H. Lewin: And our approach is to optimize for recurring and growth-oriented earnings per share. And we've talked about four core areas, strategic areas of deployment from our excess free cash flow back into our business. And those are going to come in insurance.

Speaker Change: Earnings per share.

Speaker Change: And we've talked about for core area of strategic areas of deployment from our excess free cash flow back into our business and those are going to comment on insurance.

Robert H. Lewin: Core Private Equity, Strategic M&A, and Shared Buybacks And so I think we feel very fortunate that because of the business model we have, the brand we have, the access to capital we have in distribution, we've got the opportunity to be able to invest back into our business at high levels of ROE that are going to drive really recurring and growth-oriented earnings per share over a long period of time for our investors. So that's what our focus is. We feel really good about our approach to capital allocation. I think it's a real core competency of our management team and think that that's what's going to drive the highest amount of ultimate shareholder accretion for a long period of time. And of course, it's a very much a highly aligned decision since the management team of KKR owns, you know, 25 plus percent of the stock. Check me out!

Speaker Change: Private equity strategic M&A and share buybacks and so.

Speaker Change: We feel very fortunate that because of the business model. We have the brand we have the access to capital we have in distribution that we've got the opportunity to be able to invest back into our business at high levels of Roe.

Speaker Change: That are going to drive really recurring and growth oriented earnings per share over a long period of time for our investors. So that's our focus we feel really good about our approach to capital allocation I think it's a real core competency of our management team and think that that's what's going to drive the highest amount of ultimate.

Speaker Change: Shareholder accretion for a long period of time and of course, it's a very much a highly aligned decision since the management team of KKR own.

Speaker Change: 25% of the stock.

Speaker Change: Thank you. Thank you.

Robert H. Lewin: Thank you. We have reached the end of our question and answer session, and I'll turn the call over to Craig Larson for closing remarks. Rob, thanks for your help and thank you everyone for joining this call. We know that with our announcements that we made in late November, our earnings today, and with Investor Day on the horizon on April 10th, we're asking everyone to spend a healthy amount of time on all things KKR. Just want to thank everybody in advance for investing the time. I look forward again, in particular, to the deep dive on April 10th. If you have any questions following this call, please, of course, reach out to us directly. Thank you so much. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Excuse me.

Speaker Change: We've reached the end of our question and answer session.

Speaker Change: I'll turn the call over to Craig Larson for closing remarks.

Craig Larson: Rob Thanks for your health and thank you everyone.

Craig Larson: For joining this call we know that with our announcements that we made in late November earnings today, and with Investor day on the Horizon on April 10th.

Craig Larson: We're asking everyone to spend a healthy amount of time on all things KKR just wanted to thank everybody in advance we're investing the time look forward again in particular to the deep dive on April 10th.

Craig Larson: You have any questions. Following this call. Please of course reach out to us directly.

Thank you so much.

Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.