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KKR Earnings Surge 58% on Strength in Capital Markets Unit

The KKR & Co. logo on a smartphone arranged in the Brooklyn borough of New York, US, on Wednesday, July 12, 2023. KKR & Co. is exploring options for its majority stake in a commercial lighting manufacturer in China including a potential sale, according to people familiar with the matter. Photographer: Gabby Jones/Bloomberg (Gabby Jones/Bloomberg)

(Bloomberg) -- KKR & Co. reported a third-quarter profit that beat Wall Street estimates as the alternative asset manager generated record transaction fees for its capital markets business.

Adjusted net income rose 58% to $1.24 billion, or $1.38 a share, KKR said Thursday in a statement. That beat the $1.20 average estimate of analysts surveyed by Bloomberg.

Shares of KKR rose 2.5% to $142.00 in pre-market trading at 8:11 a.m. in New York.

Fee-related earnings rose 79% to a record $1 billion, driven by management fees and a jump in those earned for arranging financing for companies. 

“Activity levels across the firm remain high as we experience a continued acceleration across our key operating metrics and financial results,” Co-Chief Executive Officers Joe Bae and Scott Nuttall said in the statement.

Assets under management increased 18% from a year earlier to $624 billion.

KKR, one of the largest publicly traded alternative asset managers, invests across a range of assets, including private equity, credit, infrastructure and real estate. 

Shares of the New York-based company returned 68% this year through Wednesday, outpacing its biggest peers, including Apollo Global Management Inc., Blackstone Inc. and Carlyle Group Inc.

KKR’s capital markets unit brought in $424 million arranging financings, with about half of those fees coming from infrastructure and for debt products. 

Total operating earnings were $1.3 billion for the period. That metric, introduced during the first quarter, includes fee-related earnings from asset management, earnings from long-term private equity holdings and profit from its Global Atlantic insurance arm. 

Global Atlantic profit rose 46% to $307.5 million from a year earlier. KKR acquired 100% ownership of the annuities business in the first quarter.

Total investing earnings, or income from selling assets, rose 7% to $318.4 million. 

Other third-quarter highlights:

  • Raised $24 billion of new capital
  • Dry powder was $108 billion as of Sept. 30
  • Private equity generated gross return of 5%
  • Infrastructure portfolio grew 6%

(Updates with shares in third paragraph.)

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