Q4 2024 KKR & Co Inc Earnings Call
Following management's prepared remarks, the conference will be opened for questions.
If you'd like to ask a question at that time the command is star one.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded I would now like to hand, the call over to Craig Larson partner and head of Investor Relations for KKR Craig. Please go ahead.
Speaker Change: Steve Murphy, Andrew Lynn Sewer Shannon Vick that's it. Isn't that right? All right. Yes. That's good. Tell us a little bit about your plot and what you're going around making and supporting.
Craig Larson: Thank you operator.
Speaker Change: Morning, everyone welcome to our fourth quarter 2024 earnings call. This morning, as usual I'm joined by Rob Lewin, Our Chief Financial Officer and.
Speaker Change: Scott Nuttall, our co Chief Executive Officer.
Speaker Change: We would like to remind everyone that we'll refer to non-GAAP measures on the call, which are reconciled to GAAP figures in our press release, which is available on the Investor Center section at KKR Dot com.
Speaker Change: And as a reminder, we report our segment numbers on an adjusted share basis.
Speaker Change: This call will contain forward looking statements, which do not guarantee future events or performance.
Speaker Change: Please refer to our earnings release, and our SEC filings for cautionary factors about these statements.
Speaker Change: So beginning with our financial results, we had a really solid into the year.
Speaker Change: So your related earnings per share came in at 94 cents that is up 24% from a year ago.
Speaker Change: And is the second highest quarterly figure in our history.
Speaker Change: And adjusted net income came in at $1 32 per share.
Speaker Change: That is up 32% year over year and is also the second highest quarterly figure in our history.
Speaker Change: For the year FRE per share and Eni per share were $3 66.
Speaker Change: And $4.70 up, 37% and 38% respectively compared to 2023.
Speaker Change: Please refer to our earnings release, and our SEC filings for cautionary factors about these statements.
Speaker Change: And both are record annual figures for us.
Speaker Change: So beginning with our financial results, we had a really solid end to the year.
Speaker Change: So very healthy growth during a period of time, where it has felt to us as the market conditions have just begun to improve.
Speaker Change: So your related earnings per share came in at 94 cents that is up 24% from a year ago.
Walking through our quarterly results in a little more detail.
Speaker Change: Management fees in Q4 came in at $906 million.
Speaker Change: And this is the second highest quarterly figure in our history.
Speaker Change: That's up 15% year over year, driven by the breadth of our fundraising activities alongside of a pickup in deployment.
Speaker Change: And adjusted net income came in at one dollar and 32 cents per share.
Speaker Change: That is up 32% year over year and is also the second highest quarterly figure in our history.
Speaker Change: Total transaction and monitoring fees were $324 million in the quarter.
Speaker Change: For the year FRE per share and Eni per share were $3, 66, and $4.70 up 37% and 38% respectively as compared to 2023.
Speaker Change: Capital markets transaction fees in particular ended the year on a strong note with $270 million in revenue.
Speaker Change: Driven primarily by deployment activity within private equity as well as infrastructure.
Speaker Change: The related performance revenues were $25 million in the quarter and so in aggregate fee related revenues were $1 3 billion and that's up 17% year over year.
Speaker Change: And both our record of annual stickers for us.
Speaker Change: So very healthy growth during a period of time, where it has felt to us as the market conditions have just begun to improve.
Speaker Change: Turning to expenses as usual fee related compensation was right at the midpoint of our guided range at 17, 5% of fee related revenues for the quarter as well as for the year.
Speaker Change: Walking through our quarterly results in a little more detail.
Speaker Change: Management fees in Q4 came in at $906 million.
Speaker Change: That's up 15% year over year, driven by the breadth of our fundraising activities alongside of a pickup in deployment.
Speaker Change: Other operating expenses were $192 million in Q4, so when total fee related earnings were 843, or <unk> 94 per share as I mentioned, a minute ago with an FRE margin of 67%.
Speaker Change: Total transaction and monitoring fees were $324 million in the quarter.
Speaker Change: Capital markets transaction fees in particular ended the year on a strong note with $270 million in revenue.
Speaker Change: Insurance operating earnings were $250 million and strategic holdings operating earnings were $8 million. Both of these figures came in right in line with the levels, we discussed on our call last quarter.
Speaker Change: Driven primarily by deployment activity within private equity as well as infrastructure.
Speaker Change: The related performance revenues were 25 million in the quarter and so in aggregate fee related revenues were $1 3 billion and that's up 17% year over year.
Speaker Change: Total operating earnings as a reminder, comprised of our fee related earnings insurance and strategic holdings operating earnings.
Speaker Change: Turning to expenses as usual fee related compensation was right at the midpoint of our guided range at 17, 5% of fee related revenues for the quarter as well as for the year.
Speaker Change: We're $1 23 per share.
Speaker Change: So total operating earnings for KKR again, these are the more durable and recurring components of our earnings comprise almost 80% of total segment earnings for the year.
Speaker Change: Other operating expenses were $192 million in Q4. So in total she related earnings were 843 or <unk> 94 per share as I mentioned, a minute ago with an FRE margin of 67%.
Speaker Change: Moving to investing earnings within our asset management segment realized performance income was $676 million and realized investment income was $110 million for total monetization activity of $786 million.
Speaker Change: Insurance operating earnings were $250 million and strategic holdings operating earnings were $8 million. Both of these figures came in right in line with the levels, we discussed on our call last quarter.
Speaker Change: That's up almost 50% year over year.
Speaker Change: This activity was driven by combination of secondary sales and strategic transactions dividends and interest income as well as the annual performance fee for Marshall Wace. So in total investing earnings were $399 million.
Speaker Change: Total operating earnings as a reminder, comprised of our fee related earnings insurance and strategic Holdings operating earnings were $1 23 per share.
Speaker Change: Turning to investment performance you can see the details here on page 10 of our earnings release.
Speaker Change: So total operating earnings for KKR again, these are the more durable and recurring components of our earnings call.
Speaker Change: The private equity portfolio was flat in the quarter and appreciate at 14% for the year.
Speaker Change: Apprised, almost 80% of total segment earnings for the year.
Speaker Change: In real assets, the opportunistic real estate portfolio was up one in the quarter and four for the year infrastructure of two for the quarter and up 14% for the year.
Speaker Change: Moving to investing earnings within our asset management segment realized performance income was $676 million and realized investment income was $110 million for total monetization activity of $786 million.
Speaker Change: And then credit the leveraged credit composite and the alternative credit composite were both up 2% in Q4 and for the year performance here was up 10 and 12% respectively.
Speaker Change: It's up almost 50% year over year.
Speaker Change: This activity was driven by combination of secondary sales and strategic transactions dividends and interest income as well as the annual performance fee for Marshall Wace. So in total investing earnings were $399 million.
Speaker Change: And then finally consistent with our historical practice, we intend to increase our annual dividend from 70 to 74 per share, which will go into effect alongside first quarter of 2025 earnings.
Rob Lewin: And with that I'm pleased to turn the call over to Rob.
Speaker Change: Turning to investment performance you can see the details here on page 10 of our earnings release.
Rob Lewin: Thanks, a lot Craig and thank you all for joining our call. This morning.
Speaker Change: Our private equity portfolio was flat in the quarter and appreciate at 14% for the year.
Rob Lewin: Kicking out a strong 2024.
And our fourth quarter results that Craig just walk through give us continued confidence as we head into 2025.
Speaker Change: In real assets, the opportunistic real estate portfolio was up one in the quarter and four for the year infrastructure up to for the quarter and up 14% for the year.
Speaker Change: I'm going to begin today by reviewing some key operating metrics from the quarter and the very tangible signs of momentum that we are seeing across our businesses.
Speaker Change: And then credit Deleveraged credit composite and the alternative credit composite were both up 2% in Q4 and for the year performance here was up 10 and 12% respectively.
Rob Lewin: Let me start first with our asset management business.
Rob Lewin: As it relates to our capital raising efforts, we raised 27 billion this quarter.
Speaker Change: And then finally consistent with our historical practice, we intend to increase our annual dividend from 70 to 74 cents per share, which will go into effect alongside first quarter 2025 earnings.
Rob Lewin: Which was driven by diversified activity across each of our business lines.
Rob Lewin: Our private equity and real asset businesses, together raised $15 billion of capital across a number of strategies.
Speaker Change: And with that I'm pleased to turn the call over to Rob.
Rob Lewin: And momentum in credit continued across our asset based finance and direct lending vehicles.
Rob: Thanks, a lot Craig and thank you all for joining our call. This morning.
Rob: KKR had a strong 2024.
Rob Lewin: And we also saw an uptick in CLO formation.
Rob: And our fourth quarter results that Greg just walk through give us continued confidence as we head into 2025.
Rob Lewin: Total new capital raised for 2024, it is 114 billion that.
Rob Lewin: That is the second most active year in our history.
Rob: I'm going to begin today by reviewing some key operating metrics from the quarter and the very tangible signs of momentum that we are seeing across our businesses.
Rob Lewin: And up meaningfully from the approximately $70 billion that we raised in 2023.
Rob Lewin: While we are only six months into our fundraising super cycle, we are seeing meaningful progress.
Rob: Let me start first with our asset management business.
Rob: As it relates to our capital raising efforts, we raised 27 billion this quarter.
Rob Lewin: In our North American private equity strategy, where we are in early stage fundraising. We are ahead of where we thought we'd be at this point in time.
Rob: Which was driven by diversified activity across each of our business lines.
Rob: Our private equity and real asset businesses, together raised $15 billion of capital across a number of strategies.
Rob Lewin: Our efforts here are benefiting from really strong investment performance.
Rob Lewin: Also of note 2024 was the eighth consecutive year that we've returned more capital to our North American private equity clients than we have called.
Rob: And momentum in credit continued across our asset based finance and direct lending vehicles.
Rob: And we also saw an uptick in CLO formation.
Rob Lewin: And alongside the encouraging first steps in our flagship fund raising within private equity and infrastructure, we continue to raise capital across the breadth of our asset classes and vehicles.
Rob: Total new capital raised for 2024 is 114 billion that is the second most active year in our history and up meaningfully from the approximately $70 billion that we raised in 2023.
Rob Lewin: Taking a step back over the past 12 months only 15% of our $114 billion of new capital raised was from our flagship funds.
Rob: While we are only six months into our fundraising super cycle, we are seeing meaningful progress.
Rob Lewin: Client interest feel strong in areas like private credit, including asset based finance in particular.
Rob: In our North American private equity strategy, where we are in early stage fundraising. We are ahead of where we thought we would be at this point in time.
Rob Lewin: Our IV sidecar franchise in insurance.
Rob Lewin: As well as in newer strategies for us such as climate.
Rob: Our efforts here are benefiting from really strong investment performance.
Rob Lewin: Turning to wealth.
Rob: Also of note 2024 was the eighth consecutive year that we've returned more capital to our North American private equity clients than we have called.
Speaker Change: We are seeing continued scaling with AUM across our K series vehicles at $16 billion as of year end.
Speaker Change: And including activity that closed January one 2025, we are now at 18 billion.
Rob: And alongside the encouraging first steps in our flagship fundraising within private equity and infrastructure, we continue to raise capital across the breadth of our asset classes in vehicles.
Which compares to $7 billion, just a year ago.
Speaker Change: Looking more broadly we now have approximately $100 billion of assets under management from individuals' larger.
Rob: Taking a step back over the past 12 months only 15% of our $114 billion of new capital raised was from our flagship funds.
Speaker Change: Largely by a family offices and ultra high net worth clients as.
Speaker Change: As well as the a credit Investor Universe.
And looking ahead.
Rob: Client interest feels strong in areas like private credit, including asset based finance in particular, our IV sidecar franchise in insurance.
Speaker Change: We expect our reach will expand to a new client base as we continue to track towards the launch of our two hybrid credit products in the first half of 2025.
Rob: As well as the newer strategies for us such as climate.
Speaker Change: These are developed exclusively in partnership with Catholic rib targeting the mass affluent.
Rob: Turning to wealth, we are seeing continued scaling with au am across our case series vehicles at 16 billion as of year end.
Speaker Change: At the same time, we continue to work on product design across other asset classes.
Rob: And including activity that closed January one 2025, we are now at 18 billion.
Speaker Change: Which will follow over the coming several quarters.
Speaker Change: So we feel good about where we are from a private wealth perspective and.
Rob: Which compares to $7 billion, just a year ago.
Speaker Change: And we really do believe that this is just the beginning for us.
Rob: Looking more broadly we now have approximately $100 billion of assets under management from individuals' largely by a family offices and ultra high net worth clients.
Speaker Change: Turning now to monetization.
Speaker Change: Over the past couple of quarters, we've been noting signs of an improved backdrop with increased M&A volumes and firmer global equity and debt markets.
Rob: As well as the a credit Investor Universe.
Rob: And looking ahead.
Speaker Change: This strength is evidenced in our 2024 gross realized performance income.
Rob: We expect our reach will expand to a new client base as we continue to track towards the launch of our two hybrid credit products in the first half of 2025.
Speaker Change: And realized investment income figures of $1 8 billion and over $600 million respectively.
Speaker Change: Overall, our monetization activity is up over 40% year on year.
Rob: These are developed exclusively in partnership with capital grid targeting the mass affluent.
Speaker Change: And now looking at deployment.
Speaker Change: In 2024, we invested 84 billion of capital.
Rob: At the same time, we continue to work on product design across other asset classes.
Speaker Change: That's up meaningfully from $44 billion in 2023, and compared to 71 billion in 2022.
Rob: Which will follow over the coming several quarters.
Rob: So we feel good about where we are from a private wealth perspective.
Rob: And we really do believe that this is just the beginning for us.
Speaker Change: This was driven by a significant ramp in credit.
Speaker Change: Along with a rebound across many of our private market strategies.
Rob: Turning now to monetization.
Rob: Over the past couple of quarters, we've been noting signs of an improved backdrop with increased M&A volumes and firmer global equity and debt markets.
Speaker Change: As we head into a more constructive environment, we do feel very well positioned.
Speaker Change: As a result of the current activity levels.
Speaker Change: Especially in relation to deployment, our capital markets business saw another strong revenue quarter at $270 million, bringing the 2024 total to $1 billion for the first time in our history.
Rob: This strength is evidenced in our 2024 gross realized performance income and realized investment income figures of $1 8 billion and over $600 million respectively.
Rob: Overall, our monetization activity is up over 40% year on year.
Speaker Change: This is a major milestone in the evolution of the business and it was the only just four years ago. When this business was roughly half the size and largely private equity driven.
Rob: And now looking at deployment in.
Rob: In 2024, we invested 84 billion of capital.
Rob: That's up meaningfully from 44 billion in 2023 and compared to 71 billion in 2022.
Speaker Change: Now turning to insurance.
Speaker Change: 2024, Mark the first year that we've owned 100% of global Atlantic.
Speaker Change: And the connectivity between KKR N G E only increased over the course of the year.
Rob: This was driven by a significant ramp in credit along with a rebound across many of our private market strategies.
Speaker Change: You've seen investment opportunities for <unk> increase in strategies like infrastructure and real estate equities.
Rob: As we head into a more constructive environment, we do feel very well positioned.
Speaker Change: And as our businesses continue to integrate.
As a result of the current activity levels, especially.
Speaker Change: We see even more opportunities to invest strategically against the long dated liabilities that global Atlantic is able to source at scale.
Rob: In relation to deployment, our capital markets business saw another strong revenue quarter at $270 million, bringing the 2024 total to $1 billion for the first time in our history.
Speaker Change: And finally, focusing on strategic holdings for a minute.
Speaker Change: Our strategic holdings business represents a big differentiator for us and the announcement. This morning is a further accelerant of this segment.
Rob: This is a major milestone in the evolution of the business and it was the only just four years ago. When this business was roughly half the size and largely private equity driven.
Speaker Change: We will be increasing the existing stakes of three businesses that we know well and really like by at least $2 1 billion.
Rob: Now turning to insurance.
2024, Mark the first year that we've owned 100% of global Atlantic.
Speaker Change: KKR will invest $1 1 billion, which will show up in strategic holdings, while the remainder will be from one of our strategic partners.
Rob: And the connectivity between KKR N G E only increased over the course of the year.
Rob: You've seen investment opportunities for <unk> increase in strategies like infrastructure and real estate equities.
Speaker Change: This piece will become fee paying assets under management and will be additive to management fees and future carried interest.
And as our businesses continue to integrate.
Rob: We see even more opportunities to invest strategically against the long dated liabilities that global Atlantic is able to source at scale.
Speaker Change: As a reminder, these businesses have high quality management teams. They are cash generative tend to be less cyclical and typically have lower leverage over the whole period to name just a few of the key attributes.
Rob: And finally, focusing on strategic holdings for a minute.
Rob: Our strategic holdings business represents a big differentiator for us and the announcement. This morning is a further accelerant of this segment.
Speaker Change: In other words these are businesses that we want to own for the long term.
Speaker Change: Today, we have 18 companies that we've invested behind over the course of the last eight years.
Rob: We will be increasing the existing stakes of three businesses that we know well and really like by at least $2 1 billion.
And we're continuing to see consistent growth across the underlying franchises for context K care share of these businesses as of the third quarter. So this is on a one quarter lag basis generated approximately $3 7 billion of revenue and approximately $900 million of EBITDA over the trailing 12 months.
Rob: KKR will invest $1 1 billion, which will show up in strategic holdings, while the remainder will be from one of our strategic partners. This piece will become fee paying assets under management and will be additive to management fees and future carried interest.
Speaker Change: We believe strategic holdings will be a truly unique driver of future financial performance for KKR for years to come.
Rob: As a reminder, these businesses have high quality management teams. They are cash generative tend to be less cyclical and typically have lower leverage over the whole period to name just a few of the key attributes.
Speaker Change: Remember no employees sit within strategic holdings, we didn't have to hire anybody new to lean into this growth opportunity, which aligns really well with our focus on preserving our collaborative one firm culture.
Rob: In other words these are businesses that we want to own for the long term.
Rob: Today, we have 18 companies that we've invested behind over the course of the last eight years.
Speaker Change: And with these additional purchases.
Speaker Change: Alongside continued strong performance across our portfolio.
Rob: And we're continuing to see consistent growth across the underlying franchises for context K care share of these businesses as of the third quarter. So this is on a one quarter lag basis generated approximately $3 7 billion of revenue and approximately $900 million of EBITDA over the trailing 12 months.
Speaker Change: We are increasing our guidance for strategic holdings operating earnings that we introduced roughly a year ago by $50 million in 2026 to 350 plus million and by $100 million in each of 2028, and 2030 to 700 plus million and one one plus billion respectively.
Rob: We believe strategic holdings will be a truly unique driver of future financial performance for KKR for years to come.
Speaker Change: I don't believe that there are many corporates that give guidance out to 2030.
Speaker Change: Hopefully this gives you a very clear sense of our confidence in the outlook.
Rob: Remember no employees sit within strategic holdings, we didn't have to hire anybody new to lean into this growth opportunity, which aligns really well with our focus on preserving our collaborative one firm culture.
Speaker Change: Durability.
Speaker Change: The growth trajectory for our business.
Speaker Change: With that let me hand, it off to Scott.
Scott Nuttall: Thanks, Rob.
Speaker Change: Given this is our year end call I want to spend a few minutes sharing how it feels inside the firm.
Rob: And with these additional purchases.
Rob: Alongside continued strong performance across our portfolio.
Scott Nuttall: And forgive me analogy.
Arena: I'm Arena and this is how I think about it.
Rob: We are increasing our guidance for strategic holdings operating earnings that we introduced roughly a year ago by $50 million in 2026 to 350 plus million and by $100 million in each of 2028, and 2030 to 700 plus million and one one plus billion respectively.
Speaker Change: The punch line is that despite all the progress you've seen in the progression of the numbers Craig and Rob just took you through we.
Speaker Change: We have not been running at full pace the last couple of years.
Speaker Change: Said another way.
Speaker Change: We are not yet operating at our true potential.
Speaker Change: But it does feel like we're picking up speed on multiple fronts.
I don't believe that there are many corporates that give guidance out to 2030.
Speaker Change: What do I mean by that.
Rob: Hopefully this gives you a very clear sense of our confidence in the outlook.
Speaker Change: Well, let's go back for me to the last two years. So you have some context for 2025.
Rob: Durability.
Rob: The growth trajectory for our business.
Speaker Change: We'll start with 2023.
Rob: With that let me hand, it off to Scott.
Speaker Change: In asset management in 'twenty, three buyers and sellers, we're far apart.
Scott: Thanks, Rob.
Speaker Change: Given this is our year end call I want to spend a few minutes sharing how it feels inside the firm.
Speaker Change: Owners of assets, including ourselves did not want to sell or finance assets in a dislocated market.
Scott: And forgive me analogy.
Speaker Change: But I'm a runner and this is how I think about it.
Speaker Change: So deployment monetization and fundraising where more muted.
Speaker Change: The punch line is that despite all the progress you've seen in the progression of the numbers Craig and Rob just took you through.
Speaker Change: Capital markets were closed for large portions of the year.
Speaker Change: There was more fear and greed and the market.
Speaker Change: We have not been running at full pace the last couple of years.
In private wealth was just watching for us.
Speaker Change: Said another way.
Speaker Change: We are not yet operating at our true potential.
Speaker Change: Hey, Global Atlantic we were at approximately 63% ownership.
Speaker Change: But it does feel like we're picking up speed on multiple fronts.
Speaker Change: We were not utilizing all of KKR.
Speaker Change: What do I mean by that.
Speaker Change: And we were still figuring out what was possible.
Speaker Change: Well, let's go back for me, it's the last two years. So you have some context for 2025.
Speaker Change: Any strategic holdings.
Speaker Change: Portfolio is still maturing and generating little cash earnings for the firm.
Speaker Change: We will start with 2023.
Speaker Change: In asset management in 'twenty three buyers themselves we're far apart.
Speaker Change: And we were still working on the vision of what it could be.
Speaker Change: Owners of assets, including ourselves did not want to sell or finance assets in a dislocated market.
Speaker Change: So in short.
Speaker Change: We were running uphill in bad weather on rough terrain in new gear.
Speaker Change: So deployment monetization and fundraising where more muted.
Speaker Change: Now, let's go to 2024.
Speaker Change: Capital markets were closed for large portions of the year.
Speaker Change: In asset management the market begin to open in the first half of last year.
Speaker Change: There was more fear and greed and the market.
Speaker Change: In private wealth was just launching for us.
Speaker Change: And buyers and sellers started finding each other again.
Speaker Change: It usually takes some time for the M&A market to turn it back on.
Speaker Change: Hey, Global Atlantic we were at approximately 63% ownership.
Speaker Change: And that's what we saw in the first half.
Speaker Change: We were not utilizing all of KKR.
Speaker Change: The market was gearing back up.
Speaker Change: But then the election distraction slowed things down again in the back half.
Speaker Change: And we were still figuring out what was possible.
Speaker Change: So we didnt see a full year of normalcy.
Any strategic holdings.
Speaker Change: And it felt a bit on off.
Speaker Change: Portfolio is still maturing and generating little cash earnings for the firm.
Speaker Change: Private wealth was still ramping for us with more hiring and the team getting embedded while were being added to many more platforms, but nowhere near what is possible.
Speaker Change: And we were still working on the vision of what it could be.
Speaker Change: Yeah.
Speaker Change: So in short.
Speaker Change: We were running uphill in bad weather on rough terrain in new gear.
Speaker Change: And you saw only the first steps in our fundraising super cycle.
Speaker Change: Yeah.
Speaker Change: So overall as you heard deployment and monetization and fundraising were all up materially last year.
Speaker Change: Now, let's go to 2024.
Speaker Change: In asset management, the market began to open in the first half of last year.
Speaker Change: But not what it could be.
And buyers and sellers started finding each other again.
Speaker Change: Our full year hospitable market.
Speaker Change: It usually takes some time for the M&A market to turn it back on.
Speaker Change: And global Atlantic, We got to a 100% ownership at the beginning of last year, and then which might be your sorting out how to use all of KKR and all of <unk> truly together.
Speaker Change: And that's what we saw in the first half the.
Speaker Change: The market was gearing back up.
Speaker Change: But then the election distraction slowed things down again in the back half.
Speaker Change: On an integrated basis.
Speaker Change: So we didnt see a full year of normalcy and.
Speaker Change: It was a learning year.
Speaker Change: And it felt a bit on off.
Speaker Change: Any strategic holdings, we explained to the market what we are doing at our Investor day in April and.
Speaker Change: Private wealth was still ramping for us with more hiring and the team getting embedded.
Speaker Change: We continue to focus on how does scale dividend flow faster and portfolio optimize.
Speaker Change: While we were being added to many more platforms, but nowhere near what is possible.
Speaker Change: And throughout the year, it became clear the earnings and dividend compounding opportunity with even greater than we expected.
Speaker Change: And you saw only the first steps in our fundraising super cycle.
Speaker Change: So overall as you heard deployment and monetization and fundraising were all up materially last year, but.
Speaker Change: But it was early.
Speaker Change: So 2024 was a good year not a great year.
But not what it could be in a full year hospitable market.
Speaker Change: We executed reasonably well.
Speaker Change: But we are still running uphill with intermittent rain after some sun.
Speaker Change: In global Atlantic, We got to a 100% ownership at the beginning of last year and then we split the ear sorting out how to use all of KKR and all of G. A truly together.
Speaker Change: And we were learning how to use our new gear.
Speaker Change: Let's be clear overall conditions were much better than 2023.
Speaker Change: On an integrated basis.
Speaker Change: And we got smarter about how to use the model we've built.
Speaker Change: It was a learning year.
Speaker Change: Any strategic holdings, we explained to the market what we are doing at our Investor day in April.
Speaker Change: So let's talk about how it feels now heading into 2025 and 2026.
Speaker Change: You continue to focus on how does scale dividends flow faster and portfolio optimize.
Speaker Change: In asset management pipelines are up.
Speaker Change: These are possible and we see more deployment opportunities globally and across asset classes.
Speaker Change: Its route the year it became clear the earnings and dividend compounding opportunity with even greater than we expected.
Speaker Change: Exits should keep fundraising momentum even more at the exact time, where in the market with a number of our flagship funds.
Speaker Change: But it was early.
Speaker Change: So 2024, it was a good year not a great year.
Speaker Change: Private wealth is showing real progress and we are seeing flows increase and broaden globally and across platforms.
Speaker Change: We executed reasonably well.
Speaker Change: But we were still running uphill with intermittent rain after some sun.
Speaker Change: And our capital group partnership is expected to launch soon in credit with other asset classes to follow we expect this partnership to be significant for us.
Speaker Change: And we were learning how to use our new gear.
Speaker Change: Let's be clear overall conditions were much better than 2023 and.
Speaker Change: And we got smarter about how to use the model we've built.
Speaker Change: And global Atlantic, we're much smarter now after a year of owning 100%.
Speaker Change: So let's talk about how it feels now heading into 2025 and 2026.
Speaker Change: We are shifting our strategy to emphasize longer duration more private market assets more global.
Speaker Change: In asset management pipelines are up more exits are possible and we see more deployment opportunities globally and across asset classes.
Speaker Change: More integration across operational areas.
We're starting to capture the opportunities we see in the capital markets in Asia are just two examples.
Speaker Change: Exits should keep fundraising momentum even more at the exact time, where in the market with a number of our flagship funds.
Speaker Change: And we see a path to fully use the power of the combined model and what that could mean.
Speaker Change: There's more opportunity than we thought.
Speaker Change: Private wealth is showing real progress and we are seeing flows increase and broaden globally and across platforms.
Speaker Change: And in strategic holdings, we can really see the potential of what this could be.
Speaker Change: And our capital group partnership is expected to launch soon in credit with other asset classes to follow we expect this partnership to be significant for us.
Speaker Change: Today's announcement is just the start.
Speaker Change: The dividend skewing in compounding opportunity is real.
So where are we now.
Speaker Change: Hey, Global Atlantic, we're much smarter now after a year of owning 100%.
Speaker Change: The Sun is out and we're running on flat road.
Speaker Change: We are shifting our strategy to emphasize longer duration more private market assets more global.
Speaker Change: The conditions and forecasts are good.
Speaker Change: We're comfortable in our new gear were stronger the last two years of hard work.
Speaker Change: More integration across operational areas.
Speaker Change: And we're picking up speed.
Speaker Change: We're starting to capture the opportunities we see in the capital markets in Asia are just two examples.
Speaker Change: Conditions could of course change, which would impact some of this political geopolitical inflation rates.
Speaker Change: And we see a path to fully use the power of the combined model and what that could mean.
Speaker Change: And then just a few.
Speaker Change: But remember take care of the business model is different.
Speaker Change: There's more opportunity than we thought.
Speaker Change: That's on purpose.
Speaker Change: And in strategic holdings, we can really see the potential of what this could be.
Speaker Change: The combination of asset management, plus insurance plus strategic holdings creates a model with a massive addressable market significant recurring earnings and the opportunity to grow with few additional people at KKR.
Speaker Change: Today's announcement is just the start.
Speaker Change: The dividend skewing in compounding opportunity is real.
Speaker Change: But where are we now.
Speaker Change: Preserving culture and enhancing our ability to perform for our clients and further increase our margins.
Speaker Change: The Sun is out and.
Speaker Change: We're running on flat road.
Speaker Change: The conditions and forecasts are good.
Speaker Change: So we're optimistic.
Speaker Change: We're comfortable in our new gear were stronger for the last two years of hard work and.
Speaker Change: Bill out there running.
Speaker Change: And happy to take your questions.
Speaker Change: And we're picking up speed.
Speaker Change: Conditions could of course change, which would impact some of this political geopolitical inflation rates.
Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: And then just a few.
Speaker Change: But remember he cares business model is different.
Speaker Change: We ask that analysts ask one question and return to the queue. If there was a follow up.
Speaker Change: That's on purpose.
Speaker Change: The combination of asset management, plus insurance plus strategic holdings creates a model with a massive addressable market significant recurring earnings and the opportunity to grow with few additional people at KKR.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the authorities one moment. Please while we poll for questions.
Speaker Change: Preserving culture and enhancing our ability to perform for clients and further increase our margins.
Speaker Change: My first question comes from Craig Siegenthaler with Bank of America. Please proceed with your question.
Speaker Change: So we're optimistic.
Bill: Bill out there running.
Bill: And happy to take your questions.
Craig Siegenthaler: Good morning, everyone Hope you're doing well our question is on the investing outlook across the firm. So the consensus outlook for 'twenty five was always stronger, but the macros become a little bit more challenging versus 90 days ago. You can see this in the 10 year and in the VIX So sitting here.
Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, we ask that analysts ask one question and return to the queue. If there was a follow up.
Speaker Change: A confirmation tone will indicate your line is in the question queue. You May press star two if he like to remove your question from the Q4 participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Craig Siegenthaler: Today in January what is the investing outlook for 2025 relative to last year and what has been the sensitivity to some of the macro trends that are developing.
Craig Siegenthaler: Hey, Craig It's Scott, let me start off with that one.
Craig Siegenthaler: Our view has not changed.
Craig Siegenthaler: I mean, I think when we were talking at the end of last year I think the perspective was heading into 'twenty five you'd.
Speaker Change: My first question comes from Craig Siegenthaler with Bank of America. Please proceed with your question.
Craig Siegenthaler: You'd see an improved M&A environment.
Craig Siegenthaler: A lot of the transactions that maybe didnt get done in 'twenty three and then maybe you got put on hold in late 'twenty four we come back to the market.
Craig Siegenthaler: Good morning, everyone Hope you're doing well our question is on the investing outlook across the firm. So the consensus outlook for 'twenty five was always stronger, but the macros become a little bit more challenging versus 90 days ago. You can see this in the 10 year and in the VIX So sitting here.
Craig Siegenthaler: Is still very much our expectation.
Craig Siegenthaler: To see the M&A market pick up this year.
Craig Siegenthaler: We expect there is going to be a lot of noise no doubt.
Craig Siegenthaler: As we look through the noise and try to figure out the signal.
Craig Siegenthaler: There's nothing that we're seeing that changes that perspective, as we sit here today and remember for us volatility creates opportunities.
Craig Siegenthaler: In January what is the investing outlook for 2025 relative to last year and what has been the sensitivity to some of the macro trends that are developing.
Craig Siegenthaler: We are expecting there will be some volatility.
Craig Siegenthaler: Hey, Craig It's Scott, let me start off with that one.
Craig Siegenthaler: I think that will make the.
Craig Siegenthaler: The investment environment, even more interesting for us.
Craig Siegenthaler: Our view has not changed.
Craig Siegenthaler: And so we remain optimistic as you heard in the prepared remarks.
Craig Siegenthaler: I mean, I think when we were talking at the end of last year I think the perspective was heading into 'twenty five.
Craig Siegenthaler: No change.
Craig Siegenthaler: And I think remember how global our businesses. So a lot of the opportunities. We see are not just in the U S but around the world.
Craig Siegenthaler: You'd see an improved M&A environment.
Craig Siegenthaler: A lot of the transactions that maybe you didn't get done in 'twenty three and then maybe you got put on hold in late 'twenty four we.
Craig Siegenthaler: You have to think about what we're telling you expect more investing more monetization and more fundraising.
Craig Siegenthaler: Come back to the market.
Craig Siegenthaler: It is still very much our expectation.
Craig Siegenthaler: Youre going to see the M&A market pick up this year.
Craig Siegenthaler: So the punch line and.
Craig Siegenthaler: We kind of keep everybody keeping their eye on the ball really hasn't changed for us.
Craig Siegenthaler: We expect there's going to be a lot of noise no doubt.
Craig Siegenthaler: As we look through the noise and try to figure out the signal.
Scott Nuttall: Thanks Scott.
Craig Siegenthaler: Theres nothing that were seeing that changes that perspective, as we sit here today and remember for us volatility creates opportunities.
Craig Siegenthaler: <unk>.
Benjamin Buddhas: Our next question comes from Benjamin Buddhas with Barclays. Please proceed with your question Hi.
Benjamin Buddhas: Hi, good morning, and thanks for taking the question.
Craig Siegenthaler: We are expecting there will be some volatility.
Speaker Change: Follow up on Craig's question thinking about the 2025 outlook maybe to start could you give us a little bit of an update on the Americas fundraise, but in terms of 2025, just maybe tying that into how should we think about sort of the trajectory of management fee growth into the year. There's obviously some dynamics with catch up fees timing of fund activations, but curious on those two items the Americas fund in.
Craig Siegenthaler: I think that will make.
The investment environment, even more interesting for us.
And so we remain optimistic as you heard in the prepared remarks.
Craig Siegenthaler: No change.
Craig Siegenthaler: And I think remember how global our businesses. So a lot of the opportunities. We see are not just in the U S. But around the world, but you have to think about what we're telling you expect more investing more monetization and more fundraising and so the punch line.
Benjamin Buddhas: How we should think about broader 2025 management fee growth. Thank you.
Craig Siegenthaler: Hey, Ben It's Craig why don't I start I'm sure Rob will pick up on the management fee trend.
Craig Siegenthaler: You kind of keep everybody keeping their eye on the ball really hasnt changed for us.
Speaker Change: Thanks for asking about Americas private equity that is you know is a is a front burner topic for us as Rob had noted we did take some capital prior to year end and without getting into the details of the first close period is still ongoing as Rob noted. We're definitely ahead of where we thought we'd be which has been really encouraging and we.
Thanks Scott.
Craig Siegenthaler: <unk>.
Craig Siegenthaler: Yeah.
Benjamin Bullish: Our next question comes from Benjamin bullish with Barclays. Please proceed.
Craig Siegenthaler: Proceed with your question.
Speaker Change: Hi, good morning, and thanks for taking the question maybe following up on Craig's question thinking about the 2025 outlook maybe to start could you give us a little bit of an update on the Americas fundraise, but in terms of 20 to 25, just maybe tying that into how should we think about sort of the trajectory of management fee growth into the year. There's obviously some dynamics with catch up fees, you know timing of fund activations, but.
Speaker Change: Do you expect to be wrapped up with a first close in Q1 here. So you should expect more news here. Shortly so good news good progress to date with more to come.
Speaker Change: Then I'll pick up on the management fee side as you know management fee growth has been a real area of relative strength for us.
Speaker Change: Curious on those two items the Americas Fund and you know how we should think about broader 2025 management fee growth. Thank you.
Back over the past three years, we've grown our management fees at a CAGR of 19%.
Speaker Change: Hey, Ben It's Craig why don't I start I'm sure Rob will pick up on the management fee trend.
Speaker Change: We were up 14% in 2024.
Speaker Change: Thanks for asking about Americas private equity that is you know it was a is a front burner topic for us as Rob had noted we did take some capital prior to year end and without getting into the details of the first close period is still ongoing as Rob noted. We're definitely ahead of where we thought we'd be which has been really encouraging and we.
Scott Nuttall: As we look forward, we can see some acceleration of management fee growth off of that level and we've got a lot of good things as Scott noted happening across our business right now.
Scott Nuttall: Our current expectation is that America's buyout fund plus or minus I will turn on mid point of the year, but theres lots of other real signs of tangible management fee growth and as you take on maybe a further step back and you look at our $4 50, plus cent per share FRE target in 2026, it's obviously.
Speaker Change: Do you expect to be wrapped up with a first close in Q1 here. So you should expect more news here. Shortly so good news good progress to date with more to come there.
Speaker Change: And I'll pick up on the management fee side as you know management fee growth has been a real area of relative strength for us.
Scott Nuttall: Target, we've got a lot of confidence in being able to hit in order to achieve that we're going to need to drive real execution around management fee growth from here on we feel like we're well positioned to be able to do that that's still a lot to get done.
Speaker Change: Back over the past three years, we've grown our management fees at a CAGR of 19%.
Speaker Change: We were up 14% in 2024 and as we look forward, we can see some acceleration of management fee growth off of that level and we've got a lot of good things as Scott noted happening across our business right now our current expectation is that America's buyout fund plus or minus I will turn on mid point of the year.
Speaker Change: Alright, great. Thank you so much.
Scott Nuttall: Thank you.
Speaker Change: Our next question comes from Alex <unk> with Goldman Sachs. Please proceed with your question.
Speaker Change: Thank you good morning, everybody.
Speaker Change: I was hoping we could go back to the strategic holdings announcements, obviously, an important step for you guys could you just maybe walk us through sort of why now why is now the right time to add when you're looking across the 18 portfolio companies that you have what is the percentage that KKR KKR owns today on balance sheet.
Speaker Change: Here, but there's lots of other real signs of tangible management fee growth and as yet.
Speaker Change: A further step back and you look at our $4 50, plus cent per share. It if I retired in 2026, it's obviously a target we've got a lot of confidence in being able to hit in order to achieve that we're going to need to drive real execution around management fee growth from here and we feel like we're well positioned to be able to do that but still a lot to get done.
Speaker Change: What percentage of any portfolio company would you feel comfortable owning overtime.
Speaker Change: Yeah, Thanks, Alex why don't I start.
Speaker Change: So tenths.
Speaker Change: <unk>, maybe the last part of your question first strategic holdings owns roughly directly.
Speaker Change: Alright, great. Thank you so much thank you.
Speaker Change: Directly 20% of the core private equity businesses now that will vary from business to business as a whole roughly 20% listen we've articulated that we view strategic holdings is a real differentiator for our business model.
Speaker Change: Our next question comes from Alex Blaustein with Goldman Sachs. Please proceed with your question.
Alex Blaustein: Thank you good morning, everybody I'm I was hoping we could go back to the strategic holdings announcements, obviously, an important step for you guys.
Speaker Change: It is in and on top of asset management and insurance and we've talked often about how we believe capital allocation can drive.
Alex Blaustein: Could you just maybe walk us through sort of why now why is now the right time to add when you're looking across the 18 portfolio companies that you have what is the percentage that KKR KKR owns today on balance sheet and I guess, what percentage of any portfolio company would you feel comfortable owning overtime.
Speaker Change: Incremental long term accretion to our recurring earnings per share.
Speaker Change: And so we saw an opportunity to buy a larger stake in three businesses that we know really well.
Speaker Change: We believed would be really accretive to our long term earnings per share growth.
Speaker Change: Yeah. Thanks, Alex why don't I start so to answer maybe the last part of your question first strategic holdings owns roughly are directly 20% of the core private equity. Yes, I said, it's now that will vary from business to business as a whole roughly 20% listen we've articulated that we.
Speaker Change: And we're excited to be able to do that.
Speaker Change: Yeah. Alex This is Scott I'll just add on just as a reminder, at least what's in strategic holdings today is the balance sheet exposure to our core private equity.
Speaker Change: Business and so that.
Speaker Change: To answer your first question that we're roughly a third of that capital.
Alex Blaustein: View strategic holdings is a real differentiator for our business model.
Speaker Change: On the whole across that platform.
Speaker Change: When you look at the last partnership that we created there.
Alex Blaustein: It is in and on top of asset management and insurance.
Speaker Change: I listened to partners this incremental investment, we're making one of our partners jump. The large insurance company is going to be investing alongside of us and so it will be half of the capital in this add on as Rob mentioned in the prepared remarks.
Alex Blaustein: And we've talked often about how we believe capital allocation can drive.
Alex Blaustein: Incremental long term accretion to our recurring earnings per share.
Alex Blaustein: So we saw an opportunity to buy a larger stake in three businesses that we know really well.
Speaker Change: And in terms of the timing, there's nothing magic about it we feel great about these companies. They continue to mature they are getting that much closer to paying meaningful dividends and already are in a couple of instances.
Alex Blaustein: That we believed would be really accretive to our long term earnings per share growth.
Alex Blaustein: And we're excited to be able to do that.
Alex Blaustein: Yeah, Alex It's Scott I'll just add on this.
Speaker Change: So as the portfolio matures and we look at the opportunity to continue to scale, what strategic holdings can be felt like a good time, we had some partners that were looking to get liquidity and so it lines up nicely for us.
Alex Blaustein: Just as a reminder, at least what's in strategic holdings today is the balance sheet exposure to our core private equity business.
Alex Blaustein: Business and so that he can answer your first question that we're roughly a third of that capital.
Speaker Change: Great. Thank you.
Alex Blaustein: On the whole across that platform.
Speaker Change: Okay.
Speaker Change: Okay.
Alex Blaustein: When you look at the last partnership that we created there.
Speaker Change: Our next question is from Bill Katz with TD Cowen. Please proceed with your question.
Alex Blaustein: We had two partners this incremental investment, we're making one of our partners jump. The large insurance company is going to be investing alongside of us and so it will be half of the capital in this add on as Rob mentioned in the prepared remarks.
Speaker Change: Okay. Thank you very much I'm just wondering if you could maybe double click into the wealth management opportunity you spoke very constructively about the outlook from here just sort of wondering where are you sort of see the greatest opportunity I know, it's a fairly in depth question just from a multi vector perspective, a product or a geography distribution channel and I was wondering you could tie that to your <unk>.
Alex Blaustein: And in terms of the timing, there's nothing magic about it we feel great about these companies they continue to mature they're getting that much closer to paying meaningful dividends and already are in a couple of instances and so as the portfolio matures and we looked at the opportunity to continue to scale, what strategic holdings can be it felt like a good time, we had some partners that were looking to get.
Speaker Change: Outlook for the other expense line as we should think about for the scaling of the platform. Thank you.
Craig Larson: Hey, Bill it's Craig why don't I start I'm sure Scott will add then on capital group. So just taking a step back and level setting for everyone. As of 12 31, we had about 100 billion of AUM from individuals and that number just to be clear does not include <unk>.
Alex Blaustein: Liquidity and sort of lined up nicely for us.
Alex Blaustein: Great. Thank you.
Dave: Thanks, Dave.
Speaker Change: Our next question is from Bill Katz with TD Cowen. Please proceed with your question.
Craig Larson: Policyholders at global Atlantic. So if anything that figure is understated as you think about the breadth of our presence in activities with individuals the largest part of that and probably the most mature would be capital that we have from high net worth and ultra high network.
Bill Katz: Okay. Thank you very much I'm just wondering if you could maybe double click into the wealth management opportunity you spoke very constructively about the outlook from here just sort of wondering where are you sort of see the greatest opportunity I know, it's a fairly depth in depth question just from a multi vector perspective, a product or a geography distribution channel and I was wondering if you could tie that to.
Craig Larson: Individuals family offices that have invested in our funds over time, one of the pieces that is growing significantly and where we still see lots of room for growth.
Bill Katz: Your outlook for the other expense line as we should think about for the scaling of the platform. Thank you.
Craig Larson: It relates to the case series products and again just for everybody. These are funds and strategies that are designed and tailored specifically for wealth investors and the accredited investor as well as qualified purchasers.
Craig Siegenthaler: Hey, Bill, it's Craig why don't I start.
Speaker Change: Sure Scott will add then on capital group.
Speaker Change: Taking a step back and level setting for everyone. As of 12 31, we had about 100 billion of AUM from individuals and that number just to be clear. It does not include.
Craig Larson: And so over 100 billion as Rob noted 16 or from a case series products as of 12 31 and that 16 goes up to 18. If you include the January subscriptions. So just in terms of case series a couple of thoughts first again that <unk> 18, a year ago compares to seven so early days, but we feel really good about.
Speaker Change: Policyholders at global Atlantic So if anything that figure is understated as you think about the breadth.
Speaker Change: Our presence in activities with individuals' the largest part of that and probably the most mature would be capital that we have from high net worth and ultra high net worth in.
Craig Larson: Our progress I think that is true in particular in infrastructure as well as in private equity, which are newer asset classes for many of these.
Speaker Change: Individuals family offices that have invested in our funds over time, one of the pieces that is growing significantly and where we still see lots of room for growth.
Craig Larson: Investors.
Craig Larson: In total we raised over $8 billion last year for infra in P and have led.
Speaker Change: Relates to the case series products and again just for everybody. These are funds and strategies that are designed and tailored specifically for wealth investors and the accredited investor as well as qualified purchasers.
Craig Larson: <unk> have leading market share in both of those asset classes and again, it's tough to draw broad conclusions from really short periods of time, but in January we raised again over $1 billion the strongest fundraising month for us.
Speaker Change: And so over 100 billion as Rob noted 16 or from a case series products as of 12 31 and that sixth thing goes up to 18. If you include the January subscriptions. So just in terms of case series a couple of thoughts first again that 18, a year ago compares to seven so early days, but we feel really good about.
Craig Larson: In both private equity as well as infrastructure and in terms of the numbers in total we did launch our private BDC more recently much younger in its seasoning and more growth and presence and so I think that's the case series growth opportunity is one that's significant and even taking a step back mass affluent investors.
Speaker Change: Our progress I think that is true in particular in infrastructure as well as in private equity, which are newer asset classes for many of these.
Craig Larson: It's not been easy for them to access alternatives historically, and we do believe over the coming years there continues to be.
Speaker Change: Investors.
Speaker Change: In total we raised over 8 billion last year for infra in P and have led.
Craig Larson: Lots of opportunities for us to grow build and scale, we think driven given our brand our track record of the investments we've made in distribution and marketing there's lots of near term opportunities for us in terms of these strategies longer term opportunities as we think again out in the long term about retirement and Faro when Kay and then another piece of that.
Speaker Change: <unk> have leading market share in both of those asset classes and again, it's tough to draw broad conclusions from really short periods of time, but in January we raised again over $1 billion the strongest fundraising month for us.
Speaker Change: In both private equity as well as infrastructure and in terms of the numbers in total we did launch our private BDC more recently much younger in its seasoning and more growth and presence and so I think that the K series growth opportunity is one that's significant and even taking a step back mass affluent investors.
Scott Nuttall: A strategic partnership with capital group and I'll, let Scott touch on that build more broadly I think part of the reason you're hearing such optimism in our voices does feel like we're just getting started here and we're pleased that we're already ahead of.
Scott Nuttall: Our early expectations. So just put it in context, Greg mentioned, the key series across all four major product areas, we really only got the products out there in the last 12 months across.
Speaker Change: It's not been easy for them to access alternatives historically, and we do believe over the coming years there continues to be.
Scott Nuttall: Private equity into real estate and credit so it's relatively recent Ross.
Speaker Change: Lots of opportunities for us to grow build and scale, we think driven given our brand our track record of the investments we've made in distribution and marketing Theres lots of near term opportunities for us in terms of these strategies longer term opportunities as we think again out in the long term about retirement in faraway Kay and then another piece of that is.
Scott Nuttall: We also have our IV vehicle in the market.
Scott Nuttall: And also sort of the high net worth individuals. So there is a big opportunity and there is more product ideas that are coming out of those conversations with platforms.
Scott Nuttall: We have great early momentum.
Scott Nuttall: We're picking up pace as I said.
Scott Nuttall: Craig mentioned capital group, we think that is a big opportunity for the firm.
Speaker Change: The strategic partnership with capital group and I'll, let Scott touch on that build more broadly I think part of the reason you're hearing such optimism in our voices. It does feel like we're just getting started here and we're pleased that we're already ahead of.
Scott Nuttall: K series really goes to be put into the U S context to accredited investors.
Scott Nuttall: Which is something thats less than 10% of U S households.
Our early expectations. So just put it in context, Greg mentioned the key series across all four major product areas, we really don't get the products out there in the last 12 months across.
Scott Nuttall: Capital Group and our partnership there.
Scott Nuttall: The mass affluent call it the other 90% of U S households.
They have been fantastic partners.
Scott Nuttall: And you should expect that we and capital group will be doing more together overtime.
Speaker Change: Private equity and for real estate and credit. So it's relatively recent for US. We also have our IV vehicle in the market that is also sort of a high net worth individuals. So there is a big opportunity and there's more product ideas that are coming out of those conversations with platforms. So we have great early momentum.
Scott Nuttall: It's early but we're really pleased with the results and as we look at the opportunity and size it for ourselves and think about what this can mean.
Scott Nuttall: 10 years from now it just continues to get larger and the more time, we spend Rob do you want to hit the expenses question.
Rob Lewin: Sure Bill.
Speaker Change: We're picking up pace as I said.
Rob Lewin: Just real quickly any K series.
Speaker Change: Craig mentioned capital group, we think that is a big opportunity for the firm.
Rob Lewin: Distribution related costs, we show.
Speaker Change: K series really goes and it will be put into the U S context to accredited investors.
Rob Lewin: And other operating expenses, which is part of the reason why you saw a little bit of an uptick this year.
Speaker Change: Which is something that's less than 10% of U S households.
Rob Lewin: We were.
Rob Lewin: As I'm sure you know able to grow our our.
Speaker Change: Capital Group and our partnership there it gets us to the mass affluent and call. It the other 90% of U S households.
Rob Lewin: Fee revenue at a pace that well exceeded our.
Rob Lewin: Our operating expense growth, even with some of those upward pressures are we where I want to say roughly 15, 5% Opex margin last year and that number was closer to 14% this year.
Speaker Change: They have been fantastic partners.
Speaker Change: And you should expect that we and capital group will be doing more together over time. So it's early but we're really pleased with the results and you know as we look at the opportunity and size it for ourselves and we think about what this can mean 510 years from now it just continues to get larger and the more time, we spend Rob do you want to hit the expenses question Yep.
Rob Lewin: We look forward.
Rob Lewin: As it relates to our operating expense and placement fees and related distribution costs, that's about as clear an ROI as we have from our spend here at KKR. So that is going up is generally a good thing overall to the model.
Speaker Change: Sure.
Speaker Change: Just real quickly.
Speaker Change: Any case series.
Rob Lewin: But other than that we try and do is a really good job to be vigilant on expenses and.
Speaker Change: Distribution related costs, we show.
Speaker Change: And other operating expenses, which is part of the reason why you saw a little bit of an uptick this year.
Rob Lewin: We do see the opportunity from here for further margin expansion.
Rob Lewin: Because we really do believe we're going to be able to continue to scale our revenue base at a level that meaningfully exceeds our head count growth across the firm and the operating complexity that will be taking on.
Speaker Change: We are.
Speaker Change: As I'm sure you know able to grow our our.
Speaker Change: Fee revenue at a pace that that well exceeded.
Speaker Change: Our operating expense growth, even with some of those upward pressures are we where I want to say roughly 15, 5% Opex margin last year and that number was closer to 14% this year.
Rob Lewin: Thank you very much.
Thank you.
Speaker Change: Our next question comes from Glenn Schorr with Evercore ISI. Please proceed with your question.
Speaker Change: And as we look forward.
Speaker Change: As it relates to our operating expense and placement fees and related distribution costs, that's about as clear an ROI as we have from a spent here at KKR. So that was going up is generally a good thing overall to the model.
Glenn Schorr: Hi, Thanks very much.
Glenn Schorr: Question in real assets and then for you obviously grew a big diversified platform very well.
Glenn Schorr: There's this huge Tam that we've been seeing in data data warehouse power.
Speaker Change: But other than that we try and do a really good job to be vigilant on expenses and we do see the opportunity from here for further margin expansion.
Glenn Schorr: You have your recent partnership with energy capital you have some recent power company acquisitions. So my question is.
Glenn Schorr: Has anything changed on the heels of deep Sea has it changed the way you think about prices.
Speaker Change: Because we really do believe we're going to be able to continue to scale our revenue base at a level that meaningfully exceeds our head count growth across the firm and the operating complexity that will be taking on.
Glenn Schorr: Paid on recently.
Glenn Schorr: Assets and or demand in the future for what everybody seems to be building and there's a tremendous data oriented god addressable market. Thanks.
Speaker Change: Thank you very much.
Speaker Change: Our next question comes from Glenn Schorr with Evercore ISI. Please proceed with your question.
Craig Larson: Hey, Glenn it's Craig why don't I start.
Craig Larson: And I guess why why don't we begin with two high level observations I think first and you would have heard this a number of times last week and I'm thinking on some of.
Speaker Change: Hi, Thanks, very much just a question.
In real assets and then for you obviously grew a big diversified platform very well. There's this huge tam that we've been seeing in data data warehouse power.
Craig Larson: The earnings calls across the tech industry in general innovation that drives efficiency is a good thing and.
Speaker Change: You have your recent partnership with energy capital you have some recent power company acquisitions. So my question is.
Craig Larson: And that can result, obviously in greater adoption and increased demand that can result from that and.
Craig Larson: And second and more specific to the data center business with the growth in overall data generation cloud and AI, There's just a need for much more compute so there's little question in our minds that long term data center power infrastructure.
Speaker Change: Has anything changed on the heels of deep Sea has it changed the way you think about prices.
Speaker Change: Made on recent.
Speaker Change: Assets and or demand in the future for what everybody seems to be building and there's a tremendous data oriented god addressable market. Thanks.
Speaker Change: Man is growing now with that said as you noted deep seek introduce questions on the demand side.
Speaker Change: Hey, Glenn it's Craig why don't I start.
Speaker Change: Really focused on how much and where right. So.
Speaker Change: And I guess why don't why don't we begin with two high level observations I think first and you would have heard this a number of times last week and I'm thinking on some of.
Speaker Change: And while it's probably too early for really anyone to have a great view around capex spend and the like when we look at our portfolio and our approach. We think we have a number of things really working in our favor. So first across our five platforms, we did not ascribe any meaningful value to a demand and our.
Speaker Change: The earnings calls across the tech industry in general innovation that drives efficiency is a good thing.
Speaker Change: And that can result, obviously in greater adoption and increased demand that can result from that.
Speaker Change: And second and more specific to the data center business with the growth in overall data generation cloud and AI, There's just a need for much more compute so there's little question in our minds that long term data center power infrastructure.
Speaker Change: [noise] underwrite.
Speaker Change: As an example, our largest investment in this space Cyrusone that was a take private announced in 2021. The thesis is that at that point was entirely driven by cloud demand and the AI dynamics have all been upside and in our more recent examples investments rather growths driven by cloud not AI again.
Speaker Change: Men is growing now with that said as you noted deep seek introduce questions on the demand side that really focused on how much and where right. So.
Speaker Change: It's been really the critical driver other things that we look at location matters interview and so our team has been focused on locations that are approximate to key population centers that we think will be difficult to replicate or replace a we do not build speculatively at the platforms and so instead, you'll see cap.
Speaker Change: And while it's probably too early for really anyone to have a great view around capex spend and the like when we look at our portfolio and our approach. We think we have a number of things really working in our favor.
Speaker Change: First across our five platforms, we did not ascribe any meaningful value to AI demand in our original underwrite.
Speaker Change: Ex once you have a contractual customer commitment in hand.
Speaker Change: And remember again these counterparties are often some of the largest most credit worthy counterparties in the world.
As an example, our largest investment in this space Cyrusone that was a take private announced in 2020. One. The thesis is that at that point was entirely driven by cloud demand and the AI dynamics have all been upside.
Speaker Change: And also in a number of our investments we enjoyed downside protection given the terms and the type of security, we own and the capital structures.
Speaker Change: And then in terms of exposures as you've heard from US on these calls look this theme is one that's really critical for us.
Speaker Change: And then a more recent examples investments rather growth driven by cloud not AI again has been really the critical driver other things that we look at location matters interview and so our team has been focused on locations that are approximate to key population centers that we think will be difficult to replicate or replace.
Speaker Change: It's an opportunity where an RV scale does matter. So today, we have data center platforms in the U S Europe Asia Middle East and.
Speaker Change: And on 100% on basis total enterprise value here would be about $50 billion. So its meaningful now at the same time.
Speaker Change: We do not build speculatively at the platforms and so instead, you'll see capex. Once you have a contractual customer commitment in hand.
Speaker Change: We have a diversified approach to portfolio construction across our pools of capital as you know so at 12 31. These investments are about 6% of our AUR them across the infrastructure platform in total.
Speaker Change: And remember again these counterparties are often some of the largest most credit worthy counterparties in the world and also in a number of our investments we enjoyed downside protection given the terms and the type of security, we own and the capital structures.
Speaker Change: So again, we expect the same to continue to be really important for us.
Speaker Change: We'll continue to watch developments very closely I hope that's helpful.
Speaker Change: And then in terms of exposures as you've heard from US on these calls look this theme is one that's really critical for us.
Speaker Change: Yes.
Speaker Change: We're prepared for that question.
Speaker Change: Right.
Speaker Change: Thanks Lynn.
Speaker Change: It's an opportunity where an RV scale does matter.
Speaker Change: Our next question comes from Dan Fannon with Jefferies. Please proceed with your question.
Speaker Change: So today, we have data center platforms in the U S Europe Asia Middle East and on 100% owned basis total enterprise value here would be about $50 billion. So its meaningful now at the same time, we have a diversified approach to portfolio construction across our pools of capital as you know.
Dan Fannon: Hi, Thanks, good morning.
Dan Fannon: Can you talk to the monetization environment and how youre thinking about that as we start 2025 and really how you see it progressing this year and what gives you confidence, which I assume is a bit more of a positive outlook on that activity level versus what we've seen in previous periods.
Speaker Change: So at 12 31. These investments are about 6% of our AUM across the infrastructure platform in total so again, we expect to seem to continue to be really important for us.
Dan Fannon: Thanks for the question, Dan we do see our monetization up in 2025 relative to 2024 and looking at the environment today pretty comfortably equity markets.
Speaker Change: We will continue to watch developments very closely I hope that's helpful.
Dan Fannon: Really conducive for that equity values are high.
Speaker Change: Yeah, everything you were prepared for that question.
Dan Fannon: Credit availability is very high and spreads are really as tight as they've been in quite some time.
Speaker Change: Thanks.
Speaker Change: Excellent.
Dan Fannon: I also think it's probably helpful to look at some context.
Speaker Change: Our next question comes from Dan Fannon with Jefferies. Please proceed with your question.
Dan Fannon: Around the overall monetization environment, we've been monetizing at a pretty healthy pace, even through what's been a more challenged time for our industry and.
Dan Fannon: Hi, Thanks, Good morning could you talk to the monetization environment and how youre thinking about that as we start 2025 and really how you see it progressing this year and what gives you confidence, which I assume is a bit more of a positive outlook on that.
Dan Fannon: And to give you a data point, if you look at our L. T M realized private equity carry and this is a number as of 930, we were up 67% our public peers were roughly flat and we think the industry is probably much more in line.
Speaker Change: That activity level versus what we've seen in previous periods.
Dan Fannon: Thanks for the question, Dan we do see our monetization up in 2025 relative to 2024 and looking at the environment today pretty comfortably equity markets are really conducive for that equity values are high.
With our public peers.
Dan Fannon: So I think you can see across the industry, maybe some client pressure to push unnaturally monetization in 2025, I don't think that same dynamic exists here and.
Dan Fannon: Credit availability is very high and spreads are really as tight as they've been in quite some time.
Dan Fannon: So while we.
Dan Fannon: Expect monetization to increase in 2025, we also expect monetization to continue to increase on the back of that in 'twenty six 'twenty seven.
Dan Fannon: So I think it's probably helpful to look at some context around the overall monetization environment, we've been monetizing at a pretty healthy pace, even through what's been a more challenged time for our industry and to give you a data point. If you look at our L. T M realized private equity carry and this is a number as of 930 we.
Dan Fannon: So we will see things can move around but we've got a very healthy portfolio. As you know our investment returns have been really strong linear deployment as a key theme across the firm has really helped that.
Dan Fannon: We feel like we're as well positioned as we ever have been.
Dan Fannon: We're up 67%.
Dan Fannon: Our public peers were roughly flat and we think the industry was probably much more in line.
Dan Fannon: Evidenced by the embedded gains that sit on our balance sheet today.
Dan Fannon: Close to an approaching 16 billion.
Dan Fannon: With our public peers, and so I think you can see across the industry, maybe some client pressure to push unnaturally monetization in 2025, I don't think that same dynamic exists here and so while we <unk>.
Dan Fannon: On a high point for us and so there's a lot here that gives us the confidence that you're going to see an uptick of monetization, but youre going to need a somewhat of a relatively benign environment to be able to access that overtime.
Dan Fannon: Expect monetization to increase in 2025, we also expect monetization to continue to increase on the back of that in 'twenty six 'twenty seven.
Speaker Change: Great. Thank you.
Dan Fannon: Thank you.
Speaker Change: Our next question comes from Michael Cyprus with Morgan Stanley. Please proceed with your question.
Dan Fannon: So we'll see things can move around but we've got a very healthy portfolio. As you know our investment returns have been really strong.
Michael Cyprus: Great. Thank you. Good morning, just a question on asset based finance I was hoping maybe you could update us on the platform today the progress that you've made over the past year and as you look ahead to 'twenty five just maybe you can give us a sense of some of the steps that you guys are going to be taking to further expand the sourcing the funnel and bank partnerships of the like.
Dan Fannon: Linear deployment as a key theme across the firm has really helped that.
Dan Fannon: We feel like we're as well positioned as we ever have been.
Dan Fannon: As evidenced by the embedded gains that sit on our balance sheet today are close to an approaching 16 billion a high point for us and so there's a lot here that gives us the confidence that you're going to see an uptick in monetization, but youre going to need a somewhat of a relative benign.
Michael Cyprus: How do you see that coming together and as you look out over the next couple of years, maybe you can kind of give us a little bit more of a flavor for how you see this evolving thank you.
Michael Cyprus: Hey, Mike It's Craig why don't I start look I'm glad you asked about.
Dan Fannon: Environment to be able to access that overtime.
Michael Cyprus: So first on page 13 of our release this is a page that.
Speaker Change: Great. Thank you.
Michael Cyprus: Details of credit liquid strategies.
Dan Fannon: Thank you.
Dan Fannon: Okay.
Michael Cyprus: We break out for that portion for us are $276 million or so of AUM. We started doing this second quarter of 'twenty. Three obviously, we will continue to do that so total credit AUM is about 250 billion.
Speaker Change: Our next question comes from Michael Cyprus with Morgan Stanley. Please proceed with your question.
Michael Cyprus: Great. Thank you. Good morning, just a question on asset based finance I was hoping maybe you could update us on the platform today the progress that you've made over the past year and as you look ahead to 'twenty five just maybe you can give us a sense of some of the steps that you guys are going to be taking to further expand the sourcing of funnel and bank partnerships off the line.
Michael Cyprus: The private credit piece is about 110 and all of that 110, we've got about 70 billion in asset based finance and another 40 indirect lending and an asset based finance those numbers continue to grow at a pretty impressive rate that compares to roughly 50 at Q4 of 23, So we're up over 40% on a year over year business.
Michael Cyprus: How do you see that coming together and as you look out over the next couple of years, maybe you can kind of give us a little bit more of a flavor sense for how you see this evolving thank you.
Michael Cyprus: <unk>, rather so big businesses with with healthy growth.
Craig Siegenthaler: Hey, Mike It's Craig why don't I start look I'm glad you asked about.
Michael Cyprus: I think in terms of your question in the outlook look ABB has a massive market six trillion on its way to nine in our view you have high barriers to entry a lack of scale capital.
Craig Siegenthaler: So first on page 13 of our release this is a page that.
Craig Siegenthaler: Details of credit liquid strategies.
Craig Siegenthaler: We break out for that portion for us are $276 billion or so of AUM. We started doing this second quarter of 'twenty. Three obviously, we'll continue to do that so total credit AUM is about 250 billion.
Michael Cyprus: And in our view lots of folks, leaving this market that's creating avoid so we're finding attractive risk reward I think our clients like the diversification away from regular way corporate credit and I think the education.
Craig Siegenthaler: The private credit piece is about 110 and all of that 110, we've got about 70 billion in asset based finance and another 40 indirect lending and asset based finance those numbers continue to grow at a pretty impressive rate that compares to roughly 50 at Q4 of 23, So we're up over 40% on a year over year business.
That our clients have as it relates to asset based finance just continues it feels like we're in the early innings.
Michael Cyprus: In some ways it feels as though.
It's like direct lending was 345 years ago, and we do think that by having global Atlantic fully integrated into everything that we're doing in the framework of the firm this positions us really well for this opportunity and I think as it relates to banks and bank partnerships.
Craig Siegenthaler: It's rather so big businesses with with healthy growth.
Craig Siegenthaler: I think in terms of your your question in the outlook look ABS, a massive market six trillion on its way to nine in our view you have high barriers to entry a lack of scale capital.
Michael Cyprus: We see their activity, we expect the broad trends to continue I think when we look overall in the industry banks today are well capitalized and they have healthy liquidity capital ratios are up I know you know this very well.
Craig Siegenthaler: And in our view lots of folks, leaving this market that's creating avoid so we're finding attractive risk reward I think our clients like the diversification away from regular way corporate credit and I think the education.
Michael Cyprus: What that brings those a real focus on ROE and.
Craig Siegenthaler: That our clients have as it relates to asset based finance just continues it feels like we're in the early innings.
Michael Cyprus: And banks have a finite amount of risk weighted assets to generate that Roe.
Michael Cyprus: So a bank can be an excellent originator, but if there aren't additional economics that there aren't recurring fees or other revenues.
Craig Siegenthaler: In some ways it feels as though.
Craig Siegenthaler: It's like direct lending was 345 years ago, and we do think that by having global Atlantic fully integrated into everything that we're doing in the framework of the firm this positions us really well for this opportunity and I think as it relates to banks and bank partnerships.
Michael Cyprus: They may not be an excellent holder.
And that creates opportunities for us because its banks make these decisions and how and where they're going to allocate their R. W. <unk>.
Michael Cyprus: Some business lines are gonna be taxes are going to be optimized youre going to be scaled and others are going to be shed.
Craig Siegenthaler: We see their activity, we expect that the broad trends to continue I think when we look overall in the industry banks today are well capitalized and they had healthy liquidity capital ratios around I know you know this very well.
Michael Cyprus: And in some ways it almost feels like there isn't much of an in between and.
Michael Cyprus: And so this dynamic in our view isn't going to change now maybe.
Michael Cyprus: We see a little less SRT activity at the margin, but the broad trends again arent changing lots of lots of continued opportunity for us.
Craig Siegenthaler: What that brings so it was a real focus on ROE.
Craig Siegenthaler: And banks have a finite amount of risk weighted assets to generate that Roe.
Michael Cyprus: Great. Thank you.
Michael Cyprus: Thank you.
Speaker Change: Our next question comes from Steven <unk> with Wolfe Research. Please proceed with your question.
Craig Siegenthaler: So a bank can be an excellent originator, but if there aren't additional economics, that's around recurring fees or other revenues they may not be an excellent holder.
Steven: Hi, good morning.
Speaker Change: Good morning, So wanted to ask a question on the fund raising outlook.
Craig Siegenthaler: And that creates opportunities for us because its banks make these decisions and how and where they're going to allocate their R. W. A some business lines are gonna be caps, they're gonna be optimized youre going to be scaled and others are gonna be shed.
Speaker Change: Ask a similar one last quarter, but Scott just borrowing from the running analogy.
Speaker Change: Noted that you guys achieved 114 billion of fund raising and that was with little contribution from flagships and some tougher market conditions. So given the upcoming fundraising super cycle and twenty-five some better conditions. You cited I was hoping you could frame the upside potential versus that 100 billion fund raising targets.
Craig Siegenthaler: And in some ways it almost feels like there isn't much of an in between.
Craig Siegenthaler: And so this dynamic in our view isn't going to change now maybe a.
Craig Siegenthaler: We see a little less SRT activity at the margin, but the broad trends again arent changing a lots of lots of continued opportunity for us.
Speaker Change: Good.
Speaker Change: And the sustainability of some of the drivers of strength in 'twenty four whether that should continue into 'twenty five.
Craig Siegenthaler: Great. Thank you.
Craig Siegenthaler: Thank you.
Speaker Change: Our next question comes from Steven <unk> with Wolfe Research. Please proceed with your question.
Speaker Change: Yeah.
Steven: Yes, I'll try Steven.
Speaker Change: No. We don't as you know we don't put out specific numbers on this we had shared.
Steven: Hi, good morning.
Steven: Good morning. So wanted wanted to ask a question on the fund raising outlook ask a similar one last quarter, but Scott just borrowing from the running analogy.
Speaker Change: At our Investor Day, 300, plus billion over the course of 24 through 26.
We're still very comfortable with those.
Speaker Change: Numbers and the plus after them.
Steven: You noted that you guys achieved 114 billion of fund raising and that was with little contribution from flagships and some tougher market conditions. So given the upcoming fundraising super cycle and twenty-five some better conditions. You cited I was hoping you could frame the upside potential versus that 100 billion fund raise.
Speaker Change: In terms of the sustainability of the drivers I think part of the reason that you're hearing.
Speaker Change: Some of them in our voices as we think a number of what you know where things you saw last year are sustainable into this year.
Speaker Change: So global Atlantic.
Speaker Change: Continuing to grow.
Speaker Change: Institutions being.
Steven: <unk> target.
Steven: And the sustainability of some of the drivers of strength in 'twenty four whether that should continue into 'twenty five.
Speaker Change: More aggressive around deploying capital now that Theyre getting more capital back we had seen that continue across areas like private credit and infrastructure.
Steven: Yeah.
Steven: Yeah I'll try Steven.
Speaker Change: Where.
Speaker Change: No. We don't as you know we don't put out specific numbers on this we had shared.
Speaker Change: Seeing more optimism across private equity now and I'd say, there is more universal view that real estate equity, which had been out of favor has bottomed.
Speaker Change: At our Investor Day, 300, plus billion over the course of 24 through 26.
Speaker Change: And so there's more interest in that asset class as well that is just emerging so a continuation of what we saw last year, and frankly, a bit more optimism and momentum.
Speaker Change: We're still very comfortable with those numbers and the plus after them.
Speaker Change: In terms of the sustainability of the drivers I think that part of the reason that you're hearing the optimism in our voices as we think a number what you never think that you saw last year are sustainable into this year.
Speaker Change: And then we had last year.
Speaker Change: Private wealth capital group.
Speaker Change: Gaining momentum.
Speaker Change: Capital Group, just starting out.
Speaker Change: So you kind of put all that together and say everything we saw last year, we expect will continue or improve.
Speaker Change: So global Atlantic.
Speaker Change: Continuing to grow.
Speaker Change: Institutions being.
Speaker Change: Over the course of this year and next.
Speaker Change: More aggressive around deploying capital and how that Theyre getting more capital back we'd seen that continue across areas like private credit and infrastructure.
Speaker Change: And then on top of that to your point, you've got the flagship funds that are going to be in the market for a greater percentage of the year.
Speaker Change: So when we put all that together that's part of the reason that youre hearing us be more upbeat about what we're seeing and we think all of that gets fed by the monetization environment improving.
Speaker Change: Sure.
Speaker Change: See more optimism across private equity now and I'd say, there's more universal view that real estate equity, which had been out of favor has bottomed and so there's more interest in that asset class as well that's just emerging so a continuation of what we saw last year, and frankly, a bit more optimism and momentum.
Speaker Change: As people get more money back theyre going to look to deploy.
Speaker Change: So we do manage the raised the $1 14 was our second best year ever.
Speaker Change: Frankly, with a backdrop that was imperfect.
Speaker Change: Than we had last year.
Speaker Change: And we think when we look at everything that I just mentioned it feels like we're going up I can't give you a number as to where it goes but if we execute in the environment stays as we expect.
Speaker Change: Well capital group.
Speaker Change: Gaining momentum.
Speaker Change: Capital Group, just starting out.
Speaker Change: And so you kind of put all that together and say everything we saw last year, we expect will continue or improve.
Speaker Change: We think you'll continue to see increased momentum.
Speaker Change: Only thing I'd add a couple of fun facts chest on this.
Speaker Change: Over the course of this year and next.
Speaker Change: And then on top of that to your point, you've got the flagship funds that are going to be in the market for a greater percentage of the year and so you know when we put all that together that's part of the reason that youre hearing us be more upbeat about what we're seeing and we think all of that gets fed.
Speaker Change: The first relates to the breadth of the platform.
Speaker Change: So if you add up the capital we raised and 24 in our more traditional private equity strategies. So midmarket P/e America's P. E. R. K series that represented 5% of the new capital we raised across the firm.
Speaker Change: By the monetization environment improving.
Speaker Change: As people get more money back theyre going to look to deploy.
Speaker Change: It's an interesting statistic now to be clear, we feel great about the work down across all of those initiatives, but I think it speaks to the development and growth across KKR.
Speaker Change: So we manage the raised the $1 14, it was our second best year ever.
Speaker Change: Frankly, with the backdrop that was imperfect.
Speaker Change: And we think when we look at everything that I just mentioned it feels like we're going up I can't give you a number as to where it goes but if we execute and the environment stays as we expect.
Speaker Change: And in contrast, 85% of the capital we raised came from our credit and real assets businesses, where we think theres a lot more running room as well.
Speaker Change: And then the second piece relates to innovation again, two thirds of the capital raised in 2024 were in strategies that didn't exist within KKR five years ago, and with opportunities for us and things like the capital group.
Speaker Change: We think you'll continue to see increased momentum.
Speaker Change: Only thing I'd add a couple of fun facts chest on this.
Speaker Change: The first relates to the breadth of the platform.
Speaker Change: So if you add up the capital we raised and 24 in our more traditional private equity strategies. So midmarket P/e America's P. E. R. K series that represented 5% of the new capital we raised across the firm.
Speaker Change: Knock on wood, there will be an opportunity for that continued to grow and we did speak at our Investor Day, I know Youll remember about the maturation in the continuing maturation of our strategies and clients. So again just thought some of those statistics would be interesting.
Speaker Change: It's it's an interesting statistic now to be clear, we feel great about the work down across all of those initiatives, but I think it speaks to the development and growth across KKR.
Speaker Change: Okay. That's great color. Thanks for taking my question.
Speaker Change: Yeah.
Speaker Change: Our next question comes from Mike Brown with Wells Fargo. Please proceed with your question.
Speaker Change: And then contrast, 85% of the capital we raised came from our credit and real assets businesses, where we think theres a lot more running room as well.
Mike Brown: Great. Good morning, Thanks for taking my question.
Speaker Change: And then the second piece relates to innovation again, two thirds of the capital raised in 2024 were in strategies that didn't exist within KKR five years ago, and with opportunities for us and things like the capital group.
Mike Brown: <unk> got some questions on the performance on slide 10, I just wanted to ask about the zero percent return or kind of a flat return quarter over quarter for the traditional P. E. Full year result that 14% is certainly good but I guess why flat quarter over quarter was there.
Speaker Change: Knock on wood there'll be an opportunity for that continued to grow and we did speak at our Investor Day, I know Youll remember about the maturation in the continuing maturation of our strategies and clients. So again you saw some of those statistics would be interesting.
Mike Brown: To call out that drove that and then just a buyout land.
Mike Brown: <unk>.
Mike Brown: The private has certainly been a very popular Dean how are you thinking about opportunities here and what are some of the key themes you're leaning into now thank you.
Speaker Change: Okay. That's great color. Thanks for taking my question.
Speaker Change: <unk>.
Mike Brown: Like why why don't I start and look I think in many ways.
Speaker Change: Yeah.
Speaker Change: Our next question comes to Mike Brown with Wells Fargo. Please proceed with your question.
Mike Brown: Q4.
Speaker Change: Uh huh.
Speaker Change: And evidence of the difficulty you're looking at big broad indices S&P was up two 5% in Q4 and look the average market cap S&P name is about $110 billion I think in contrast, if you look at the Russell 2000, which many ways is a lot more representative of the companies and portfolios and opportunities that we're pursuing.
Mike Brown: Great. Good morning, Thanks for taking my question.
Speaker Change: <unk> got some questions on the performance on Slide 10, I just wanted to ask about the zero percent return or for kind of a flat return quarter over quarter for the traditional P. E. Full year result that 14% is certainly good but I guess with lie flat quarter over quarter was there.
Speaker Change: It was flat in the quarter and that dynamic is one that is even greater when you look over the course of calendar 'twenty for S&P was up 25, and the Russell was up 11, and a half so I think to the heart of your question, we actually feel.
Mike Brown: You can call out that drove that and then just a buyout land.
Trend of public to privates has certainly been a very popular dean how are we thinking about opportunities here and what are some of the key themes you're leaning into now thank you.
Speaker Change: It's tough to look at these performance numbers over any.
Speaker Change: 90 day period and draw any broad conclusions, but we continue to feel really good about broad execution in the traditional part of our business I think that is true in 'twenty four and think that's true more broadly looking across vintages.
Speaker Change: Like why why don't I start and look I think in many ways Q4.
Mike Brown: Uh huh.
And evidence from the difficult when you're looking at big broad indices S&P was up two 5% in Q4 and look the average market cap S&P name is about $110 billion I think in contrast, if you look at the Russell 2000, which many ways is a lot more representative of the.
Speaker Change: Yeah, and the second part of your question, Mike I'd say.
Speaker Change: I'd broaden it yes, there's opportunity in public to private space.
Speaker Change: And there's just a lot of dispersion in the market there are some.
Mike Brown: Companies and portfolios and opportunities that we're pursuing it.
Speaker Change: Industries that are getting a lot of attention, but if you're a smaller market cap company a lot of what we're doing is $1 billion to $5 billion you don't get the same attention from the analyst community from the Investor community you.
Mike Brown: It was flat in the quarter and that dynamic is one that is even greater when you look over the course of calendar 'twenty for S&P was up 25, and the Russell was up 11, and a half so I think to the heart of your question, we actually feel it's.
Speaker Change: You can get a little left behind and.
Speaker Change: And we're finding a number of management teams that just are not enjoying the quarter to quarter reality and so we continue to see that as a big opportunity for us globally, which I'll come back to I would also point to not just that type of transaction. It's a corporate carve outs strategics wants to have simple stories.
Mike Brown: It's tough to look at these performance numbers over any.
Mike Brown: 90 day period and draw any broad conclusions, but we continue to feel really good about broad execution in the traditional part of our business I think that is true and 24 in fact, that's true more broadly looking across vintages.
Speaker Change: So if they've got something that's creating some complexity and operating subsidiary that maybe doesn't fit.
Mike Brown: Yeah, and the second part of your question, Mike I'd say.
Mike Brown: I'd broaden it yes, there's opportunity in public to private space.
Speaker Change: Narrative, they're looking to sell those.
Speaker Change: And that's actually been our best performing type of investment in private equity over 40, nearly 49 year history is corporate carve outs. So we're seeing opportunities there.
Mike Brown: And there's just a lot of dispersion in the market there are some.
Mike Brown: Industries that are getting a lot of attention, but if you're a smaller market cap company a lot of what we're doing is $1 billion to $5 billion you don't get the same attention from the analyst community from the Investor community you.
Speaker Change: I think youre also going to see more sponsor to sponsor activity.
Speaker Change: As sponsors look to give capital back to their Lps in this environment.
Mike Brown: You can get a little left behind and.
Speaker Change: I mentioned this really is a global set of opportunities. So Japan, we've been particularly active in market continues to open up.
Mike Brown: And we're finding a number of management teams that just are not enjoying the quarter to quarter reality and so we continue to see that as a big opportunity for us globally, which I'll come back to I would also point to not just that type of transaction. It's a corporate carve outs strategics want to have simple stories.
Speaker Change: Europe.
Speaker Change: Is relatively cheap.
Speaker Change: These base there that have global operations or maybe trading at European discount today. So there's lots of different ways for us to express their views around the world, but let me stop there, but we do see the deployment opportunity is very attractive.
Mike Brown: So if they've got something that's creating some complexity and operating subsidiary that maybe doesn't fit.
Speaker Change: Great. Thank you for all that color Scott.
Mike Brown: Narrative, they're looking to sell those.
Mike Brown: And that's actually been our best performing type of investment in private equity over 40, nearly 49 year history is corporate carve outs. So we're seeing opportunities there.
Craig Larson: Thank you Craig definitely understand that yes the.
Speaker Change: Quarterly moves are.
Speaker Change: One data point the.
Speaker Change: The bigger trends thank you for that.
Mike Brown: Thank you Mike.
Mike Brown: I think you're also going to see more sponsor to sponsor activity.
Speaker Change: Our next question comes from Vikram Gandhi with HSBC. Please proceed with your question.
Mike Brown: As sponsors look to give capital back to their Lps in this environment and as I mentioned this really is a global set of opportunities. So Japan, we've been particularly active market continues to open up.
Vikram Gandhi: Hi, Good morning. Thank you for the opportunity. My question is really related to GE when looking at the growth in the adjusted book value versus the operating earnings. It appears that the group has been injecting.
Mike Brown: Europe.
Mike Brown: Relatively cheap.
Mike Brown: These base there that have global operations or maybe trading at European discount today. So there's lots of different ways for us to express these used around the world, but let me stop there, but we do see the deployment opportunity is very attractive.
Vikram Gandhi: 400 million of capital each quarter last year, the impression I had was.
Vikram Gandhi: Was that <unk> was quite well capitalized even considering a reasonable group. So I'm wondering how should we think about the growth going forward and the earnings run rate for 2025.
Speaker Change: Great. Thank you for all that color Scott.
Speaker Change: Thank you Craig I definitely understand that are the.
Speaker Change: Quarterly moves are just one data point about the bigger trends. Thank you for that thank.
Speaker Change: Yeah, great. Thanks, Vikram I'll handle both those questions.
Speaker Change: Thank you Mike.
Speaker Change: So first thing the capital contributed in the course of 2020 for some of that capital has contributed as part of the original transaction.
Speaker Change: Our next question comes from Vikram Gandhi with HSBC. Please proceed with your question.
When we funded it in early January and then we also said at the time that we were going to look.
Vikram Gandhi: Hi, Good morning. Thank you for the opportunity. My question is really related to G. I'm looking at the growth in the adjusted book value was at the operating earnings. It appears that the group has been injecting.
Speaker Change: Across the KKR balance sheet on the asset management side to see what assets could be really conducive to an insurance company balance sheets. So what you'll also see is some contribution in kind of some investments that fit frankly, better on an insurance company balance sheet.
Vikram Gandhi: 400 million of capital each quarter last year, the impression I had what's that Geo was quite well capitalized even considering a reasonable group. So I'm wondering how should we think about the growth going forward and the earnings run rate for 2025.
Scott Nuttall: As it relates to performance, let me reiterate and go back to what Scott said.
In the prepared remarks, we're feeling great about how our teams are coordinating today the opportunity in front of us.
Speaker Change: Yeah, great. Thanks, Vikram I'll handle both those questions.
Scott Nuttall: I was all of the ingredients are there.
Vikram Gandhi: So first thing the capital.
Scott Nuttall: That reside inside of of our broader firm today to continue to build what we think is a really unique and highly profitable insurance franchise and we've also talked about evolving our approach a bit and you're seeing that play out through the P&L and what that means is on behalf of our clients. We are taking on longer dated.
Vikram Gandhi: <unk> in the course of 2020 for some of that capital has contributed as part of the original transaction.
Vikram Gandhi: When we funded it in early January and then we also said at the time that we were going to look across the KKR balance sheet on the asset management side to see what assets could be really conducive to an insurance company balance sheet. So what you'll also see is some contribution in kind of some investments that fit frankly better on an insurer.
Scott Nuttall: It liabilities, so ilan gating, our liability profile as part of that.
Scott Nuttall: We're doing a bit more on the private side really taking advantage for the first time, the full breadth of Kkr's investments right and so what you're going to see we believe is definitely if we perform we've got confidence we'll definitely better P&L. It comes in Roe's overtime from this evolved shift.
Vikram Gandhi: The company balance sheet.
Speaker Change: As it relates to performance, let me reiterate and go back to what Scott said in the prepared remarks, we're feeling great about how our teams are coordinating today the opportunity in front of us.
Speaker Change: I was all of the ingredients.
Scott Nuttall: But very intentionally we're bringing down our Roe.
Speaker Change: That reside inside of of our broader firm today to continue to build what we think is a really unique and highly profitable insurance franchise and we've also talked about evolving our approach a bit and you're seeing that play out through the P&L and what that means is on behalf of our clients were taken on on longer data.
Scott Nuttall: And the accounting P&L as we transition and the reason for that is many of the privates that we're doing and where we've got really differentiated origination capabilities, they've got modest yields and in some cases no yields.
Scott Nuttall: And so we feel good about the underlying economics, even at the time when naturally youre going to see subdued accounting P&L and so to be clear we would expect over the next couple of quarters do you have insurance operating earnings that is plus or minus where we were in Q4.
Speaker Change: It liabilities, so ilan gating, our liability profile as part of that.
Speaker Change: We're doing a bit more on the private side really taking advantage for the first time, the full breadth of Kkr's investments right and so what you're going to see we believe is definitely if we perform we've got confidence, we'll definitely better P&L that comes in a row ease over time from this evolved a shift.
Scott Nuttall: And that is the expectation as we make this shift.
Scott Nuttall: But at the same time, the underlying economics of what we are doing we feel good about it and as we perform is going to show up in the P&L overtime.
Speaker Change: But very intentionally we're bringing down our Roe.
Speaker Change: And the accounting P&L as we transition and the reason for that is many of the privates that we're doing and where we've got really differentiated origination capabilities, they've got modest yields and in some cases no yields.
Scott Nuttall: Okay. That's very helpful. Thank you. Thank you.
Speaker Change: Our next question comes from Christopher <unk> with Oppenheimer and company. Please proceed with your question.
Christopher: Good morning. Thank you I was just wondering if you could.
Speaker Change: And so we feel good about the underlying economics, even at the time when naturally youre going to see subdued accounting P&L and so to be clear we would expect over the next couple of quarters to have insurance operating earnings that is plus or minus where we were in Q4.
Christopher: Expand on the question you had earlier about the flagship private equity funds and I guess, just I'm looking at infrastructure five and the global climate Fund.
There are still raising money, but don't look like they've made investments yet and I am wondering how long is it.
And that is the expectation as we make this shift but.
Speaker Change: But at the same time, the underlying economics of what we are doing well.
That investment period open and should we expect kind of meaningful catch up fees that at some point and then on Europe and Asia.
Speaker Change: We feel good about and as we perform is going to show up in the P&L overtime.
Christopher: Those funds it looked like they were roughly half called when should we expect.
Speaker Change: Okay. That's very helpful. Thank you. Thank you.
Speaker Change: Our next question comes from Chris Kotowski with Oppenheimer <unk> Company. Please proceed with your question.
Christopher: Fund raising to commence for for those successor funds.
Christopher: Hey, Chris It's Craig why don't I start and look I think we've got a very healthy pipeline in terms of individual funds and strategies that we're fundraising for.
Chris Kotowski: Yeah. Good morning. Thank you I was just wondering if you could expand.
Chris Kotowski: Expand on the question you had earlier about the the flagship private equity funds and I guess, just I'm looking at infrastructure five and the global climate Fund.
Christopher: And for our strategy continues to be a front burner topic for us as of 12 31, we'd raised 11.
Speaker Change: There are still raising money, but don't look like they've made investments yet and I'm wondering how long is that investment period open and should we expect kind of meaningful catch up fees that at some point and then on Europe and Asia.
Christopher: Last one was 17, so we feel great about progress.
Christopher: We did turn that fund on in the middle of last year, So that is something where youre sitting management fees.
We do expect also to launch fund raising for our Asia infrastructure strategy here shortly.
Christopher: So more to come as it relates to businesses that in particular, we think there's a real big opportunity for us to to grow build and scale.
Chris Kotowski: Those funds it looked like they were roughly half called <unk>.
Speaker Change: When should we expect.
Speaker Change: Fund raising to commence for for those successor funds.
Christopher: At the same time, so it's just tough on individual funds to parse.
Speaker Change: Christopher It's it's Craig why don't I start and look I think we've got a very healthy pipeline in terms of individual funds and strategies that we're fundraising for.
Christopher: Parse through I think the one other reminder, when you look at the fund table.
We will often draw let me make a investment draw capital under a capital call line, that's payback typically in 180 days or less.
Speaker Change: And for our strategy continues to be a front burner topic for us as of 12 31, we'd raised 11.
Christopher: So when you actually look at those deployment figures. They often are understated relative to capital as we look at the available capital. That's remaining and then the second dynamic there is if we have a platform build again that and something where we expect to invest capital over a multiyear period of time and if the first piece of that has been called.
Speaker Change: Last one was 17, so we feel great about progress.
Speaker Change: We did turn that found on in the middle of last year, So that is something where youre seeing management fees.
Speaker Change: We do expect also to launch fund raising for our Asia infrastructure strategy here. Shortly so more to come as it relates to businesses that in particular, we think there's a real big opportunity for us to to grow build and scale.
Christopher: That first piece shows up in that.
Christopher: That's in line. So I think just overall when you're looking at the funds and the status, where we are and how close we are to have whether its fund raising or turning on a fund the numbers that you would or the percentage figures that you would be looking at in terms of that table, if anything tend to be understated.
Speaker Change: At the same time, so it's it's just tough on individual funds to par.
Speaker Change: Parse through I think the one other reminder, when you look at the fund table.
Speaker Change: Yeah, the only thing I'd add Chris is you're you're you're right to observe that.
Speaker Change: We will often draw when we make our investment draw capital under a capital call line, that's payback typically in a 180 days or less.
Christopher: They were in the market with a number of these strategies and still today.
Speaker Change: Including insulin climate.
Speaker Change: So when you actually look at those deployment figures. They often are understated relative to capital as we look at the available capital. That's remaining and then the second dynamic there is if we have a platform build again that and something where we expect to invest capital over a multiyear period of time and if the first piece of that has been called.
Speaker Change: North American private equity private equity to follow.
Speaker Change: In Asia, probably before Europe would be my guess and just in terms of sequencing. So we'll keep you posted in future quarters as we launch those incrementals strategies I think the bigger higher level point, though.
Speaker Change: Last two years, we raised $183 billion.
Speaker Change: Give or take only about 10% of that was from flagship funds.
Speaker Change: That first piece shows up in that.
Speaker Change: That's in line. So I think just overall when you're looking at the funds and the status, where we are and how close we are to have whether its fund raising or turning on a fund the numbers that you would or the percentage figures that you would be looking at in terms of that table, if anything tend to be understated.
Speaker Change: To the point from the prior discussion it should be quite additive as we head into the next couple of years.
Speaker Change: Okay great.
Speaker Change: Great. Thanks, that's it for me.
Speaker Change: Thanks, Chris.
Speaker Change: My last question is from Patrick Davitt with Autonomous Research. Please proceed with your question.
Speaker Change: Yeah. The only thing I'd add Chris is you're you're you're right to observe that were in the market with a number of these strategies still today.
Patrick Davitt: Hey, good morning, everyone just quickly back on the monetization theme could you give the usual visible realized cash flow stat that you gave and then more broadly another firm made it pretty clear I think last week that they thought this monetization theme was more a second half event it sounded like today you.
Speaker Change: Including in front and climate.
Speaker Change: He got North American private equity Europe private equity to follow.
Speaker Change: In Asia, probably before Europe would be my guess and just in terms of sequencing. So we'll keep you posted in future quarters as we launch those incrementals strategies I think the bigger higher level point, though.
Speaker Change: I think the situation is different for KKR is that the case or do you agree it could be more of a second half event. Thank you.
Speaker Change: Last two years, we raised $183 billion.
Speaker Change: Give or take only about 10% of that was from flagship funds.
Speaker Change: Yeah, Patrick I just in terms of timing I think things are pretty fluid here. So it's hard to pinpoint it in any half of the year.
Speaker Change: So to the points from the prior discussion you know it should be quite additive as we head into the next couple of years.
Speaker Change: Okay.
Speaker Change: Great. Thanks, that's it for me thanks.
Speaker Change: Reiterate our expectation is that we do expect monetization to be up.
Speaker Change: Thanks, Chris.
Speaker Change: My last question is from Patrick Davitt with Autonomous Research. Please proceed with your question.
Speaker Change: For us in 'twenty five versus 24 based on the current.
Speaker Change: Market conditions.
Speaker Change: So the specific question on visibility that we have we've got approaching $400 million of that high visibility revenue things that have already been signed up.
Patrick Davitt: Hey, good morning, everyone just quickly back on the monetization theme could you give the usual visible realized cash flow stat that you give and then more broadly another firm made it pretty clear I think last week that they thought. This this monetization theme was more a second half event it sounded like today you.
Speaker Change: Or or announced just.
Speaker Change: Just based on regulatory approvals unclear that all hits in Q1.
Speaker Change: So pretty good visibility as we head into the year you typically see this period of time, where pipelines are rebuilding after deals getting closed try to get close by year end of course, five weeks into the quarter and you know why.
Speaker Change: I think the situation is different for KKR is that the case or do you agree it could be more of a second half event. Thank you.
Speaker Change: Yeah, Patrick I just in terms of timing I think things are pretty fluid here. So it's hard to pinpoint it in any half of the year I'll reiterate our expectation is that we do expect monetization to be up for.
Speaker Change: <unk> are pretty.
Speaker Change: Pretty strong right now so we'll see what transpires for the quarter and are.
Speaker Change: We will keep you guys abreast.
Speaker Change: For us in 'twenty five versus 24 based on the current.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Market conditions.
Speaker Change: As it relates to a specific question on the visibility that we have we've got approaching $400 million of that high visibility revenue things that have already been signed up.
Speaker Change: Okay.
Speaker Change: We have reached the end of the question and answer session I would now like to turn the call back over to Craig Larson for closing comments.
Speaker Change: Thank you and we'd just like to thank everybody for your continued attention and interest in KKR and we look forward to giving everybody. The next update in 90 days or so thank you so much.
Or or announced.
Speaker Change: Just based on regulatory approvals unclear that all hits in Q1.
Speaker Change: Yes.
Speaker Change: So pretty good visibility as we head into the year you typically see this period of time, where pipelines are rebuilding after deals getting closed try to get close by year end of course, five weeks into the quarter and our pipelines are pretty.
Speaker Change: Pretty strong right now so we'll see what transpires for the quarter and are well.
Speaker Change: We'll keep you guys abreast.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: We have reached the end of the question and answer session I'd now like to turn the call back over to Craig Larson for closing comments.
Speaker Change: Thank you and we'd just like to thank everybody for your continued attention and interest in KKR and we look forward to giving everybody. The next update in 90 days or so thank you so much.
Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.
Okay.
Speaker Change: Today's conference has ended please disconnect your lines. Thank you.