KKR & Co., Inc. Q1 FY2025 earnings call

• Tariffs impact: Estimate 90% of AUM has limited to no first-order impact from tariffs, core private equity and strategic holdings not materially affected. Infrastructure companies mostly have contractual protections or minimal exposure. Credit portfolio has pockets of exposure but opportunities outweigh downsides.
• Deployment and monetization: Announced over $10 billion of investments in last 4 weeks since tariff announcement. Gross unrealized performance income stands at $8.7 billion, up over 25% y/y. Pending monetization revenue over $800 million, with at least $250 million expected in Q2.
• Capital raising: Total new capital raised in Q1 was $31 billion. North America private equity strategy completed initial close at $14 billion. K-Series suite of vehicles has AUM of $22 billion. Two public private credit solutions launched, with more product launches planned in second-half.
• Insurance: One year into owning 100% of Global Atlantic, progressing on sourcing liabilities and assets. All-in pre-tax ROE of insurance business approaching 20% with path to 20-plus% returns. Management fees from Ivy sidecar vehicles and strategic partnerships, capital markets fees with potential for several hundred million in annual revenues.
• Durability of model: Over 90% capital perpetual or committed for 8+ years, $116 billion uncalled capital, $64 billion committed with fees not yet earned. Management fees well diversified across asset classes, with healthy growth in past three years.

Fee-related earnings per share came in at $0.92, up 22% year-over-year. Total operating earnings of $1.24 per share are up 16% year-over-year. Adjusted net income of $1.15 per share is up 19% compared to a year ago. Management fees in Q1 were $917 million, up 13% year-over-year. Total transaction and monitoring fees were $262 million. Capital markets transaction fees were $229 million. Fee-related performance revenues were $21 million. Altogether, fee related revenues came in at $1.2 billion, up 22% year-over-year. Fee-related compensation was 17.5% of fee related revenues. Other operating expenses were $168 million. Fee related earnings were $823 million or $0.92 per share with an FRE margin of 69%. Insurance segment operating earnings were $259 million and strategic holdings operating earnings were $31 million. Today, the share of annual revenue and EBITDA across the 18-company portfolio in strategic holdings is approximately $3.8 billion and $920 million, respectively.

• No changes to fundraising targets, continued conviction in fundraising outlook.
• Expect to continue investing in current volatile environment, with potential delays in sale processes.
• Plan to give update on private equity and real asset product launches in second-half, including work on model portfolios and target date funds.

• Tariffs could have individual direct impact on parts of the portfolio.
• Market volatility could affect deployment and monetization activity.
• Uncertainty in LPs' responses and fundraising dynamics in changing market conditions.

Q: On Asia business and trade war impact A: Scott Nuttall said no change to strategy, Asia is a big opportunity with significant growth and diversification in AUM. Craig Larson added on AUM growth in Asia.

Q: On share buybacks A: Rob Lewin said share buybacks are part of capital allocation framework, aligned with maximizing long-term earnings per share and shareholder interests.

Q: On asset-backed finance platform A: Craig Larson discussed growth in asset-based finance, large end market, high barriers to entry, and attractive risk-reward in current environment.

Q: On capital markets fees A: Robert Lewin said capital markets fees business is solid, with protected downside in choppy markets and upside potential, with $600M+ revenue in 2022-2023 and spike in 2024.

Q: On private equity industry outlook A: Scott Nuttall said there will be dispersion of results, with institutional investors consolidating with better-performing, global, multi-asset class managers.

Q: On private wealth and product launches A: Craig Larson and Scott Nuttall discussed early stages of product launches, focus on long-term investment performance, and work on model portfolios and target date funds.

Q: On flagship fundraising in 2025 A: Craig Larson talked about progress on North America private equity, infra fundraising, and breadth of activity across platform.

Q: On LP conversations and fundraising health A: Scott Nuttall said discussions are early, clients are liquid and asking about where to invest, with cautious greed and not wanting to repeat past mistakes.

Q: On insurance segment earnings outlook A: Robert Lewin explained focus on long-term economics, elongating liabilities, and momentum in initiatives like third-party capital and alternatives, with all-in ROE target of 20-plus%.

Q: On bank debt availability and private credit A: Robert Lewin and Scott Nuttall discussed bank debt availability with higher spreads, private credit opportunity remaining robust, and attractive spread opportunity in private credit business.